AK & R. Whipple Plumbing & Heating v. Guy

• Decision Date: 11 June 2004
• Docket Number: No. 20020495.,20020495.
• Citation: 2004 UT 47,94 P.3d 270
• Parties: A.K. & R. WHIPPLE PLUMBING AND HEATING, Plaintiff and Respondent, v. Thomas D. GUY and Aspen Construction, a Utah corporation, Defendants and Petitioners.
• Court: Utah Supreme Court

94 P.3d 270

2004 UT 47

A.K. & R. WHIPPLE PLUMBING AND HEATING, Plaintiff and Respondent, v. Thomas D. GUY and Aspen Construction, a Utah corporation, Defendants and Petitioners.

No. 20020495.

Supreme Court of Utah.

June 11, 2004.

Steven B. Wall, Salt Lake City, for plaintiff.

Joseph M. Chambers, Logan, for defendants.

On Certiorari to the Utah Court of Appeals

DURHAM, Chief Justice:

INTRODUCTION

¶ 1 Thomas D. Guy (Guy) and Aspen Construction (Aspen) were defendants in a mechanic's lien foreclosure action brought by A.K. & R. Whipple Plumbing and Heating (Whipple). We granted Guy and Aspen's petition for certiorari review of the court of appeals' decision affirming the trial court's award of no attorney fees in connection with this case. They urge us to find that the trial court's application of a so-called "flexible and reasoned approach" to determining the "successful party" pursuant to section 38-1-18 of the Utah Code wrongly led the trial court to find that Guy and Aspen were not the "successful parties" in this dispute. Because of the trial court's reasoning, it found that Guy and Aspen were not entitled to attorney fees, even though they won a net judgment of $527 and Whipple did not win everything it sought through its mechanic's lien. We affirm.

BACKGROUND

¶ 2 Guy, a homeowner, hired Aspen, a general contractor, to coordinate construction projects on three different properties.¹ Aspen hired Whipple to perform heating, ventilation and air conditioning (HVAC) work, plumbing work, and other services on the properties. Problems arose with the HVAC system on one of the properties, known as the Thayne's Canyon property. Because of these problems, Aspen terminated Whipple's services and refused further payment until Whipple fixed the HVAC system. Whipple then filed mechanic's lien foreclosure actions on all three properties, and Aspen counterclaimed for damages based on the defective HVAC system. The three mechanic's lien actions were consolidated for trial.

¶ 3 Two of the lien foreclosure actions are not at issue in this case.² Rather, it is the third, largest mechanic's lien for Whipple's work on the Thayne's Canyon property that is at issue. Although the exact amount of this lien is disputed, we have determined that it was $30,641.35.³ Aspen, in turn, claimed $25,000 in damages based on Whipple's allegedly negligent HVAC work on the Thayne's Canyon property. Whipple II, 2002 UT App 73 at ¶ 20, 47 P.3d 92. Based on that $25,000 counterclaim, the trial court awarded Aspen a $7,000 "offset for damages based on [Whipple's] deficient work." After calculating the consequences of the parties' respective wins and losses on their competing claims, the trial court awarded a net judgment to Aspen in the amount of $527. Id.

¶ 4 Notwithstanding its finding that Aspen should receive $527, the trial court held that Aspen was not a "successful party" pursuant to section 38-1-18 of the Utah Code. The trial court found, and the court of appeals agreed, that "where the net recovery is only $527, ... this is essentially a `draw.'" Id. (internal quotation omitted). The court of appeals in Whipple II based its decision on the "flexible and reasoned" approach set forth in Mountain States Broadcasting Co. v. Neale, 783 P.2d 551, 557 (Utah Ct.App.1989) (mem. decision on petition for reh'g) (Mountain States II) (internal quotation omitted), and followed in Occidental/Nebraska Federal Savings Bank v. Mehr, 791 P.2d 217 (Utah Ct.App.1990). See Whipple II, 2002 UT App 73 at ¶¶ 15-19, 47 P.3d 92.

¶ 5 Aspen argues that the flexible and reasoned approach is inapplicable to this case, and that instead we should interpret section 38-1-18's term "successful party" as requiring application of a straight "net judgment" rule for determining the successful party. The net judgment rule requires the court to consider only which party recovered a net judgment, and award attorney fees to that party. See Mountain States II, 783 P.2d at 557-58

. Because Aspen received a net judgment of $527, and Whipple failed to recover some of what it sought under its Thayne's Canyon mechanic's lien, Aspen argues that it was the "successful party" with respect to that lien.

STANDARD OF REVIEW

¶ 6 When reviewing attorney fee decisions that involve questions of law, we review for correctness. Robertson v. Gem Ins. Co., 828 P.2d 496, 499 (Utah Ct.App.1992). This is also the standard we apply when construing statutes. Platts v. Parents Helping Parents, 947 P.2d 658, 661 (Utah 1997).

ANALYSIS

¶ 7 Although courts have inherent equitable power to award attorney fees when justice or equity requires, Stewart v. Utah Pub. Serv. Comm'n, 885 P.2d 759, 782 (Utah 1994), attorney fees are typically recoverable only if an applicable statute or contract so provides. Id.; Mountain States Broad. Co. v. Neale, 776 P.2d 643, 648 (Utah Ct.App.1989) (Mountain States I), clarified by Mountain States Broad. Co. v. Neale, 783 P.2d 551 (Utah Ct.App.1989)

(mem. decision on petition for reh'g) (Mountain States II). Section 38-1-18 of the Utah Code states:

Except as provided in Section 38-11-107, in any action brought to enforce any lien under this chapter the successful party shall be entitled to recover a reasonable attorneys' fee, to be fixed by the court, which shall be taxed as costs in the action.

Utah Code Ann. § 38-1-18 (1997).⁴ By its use of the word "shall," the provision mandates that the successful party be allowed to recover reasonable attorney fees. Richards v. Sec. Pac. Nat'l Bank, 849 P.2d 606, 612 (Utah Ct.App.1993). Thus, courts do not have discretion to decide whether to award reasonable attorney fees to the "successful party." Reeves v. Steinfeldt, 915 P.2d 1073, 1079 (Utah Ct.App.1996). The court of appeals has correctly stated that a "successful party includes one who successfully enforces or defends against a lien action." Kurth v. Wiarda, 1999 UT App 335, ¶ 9, 991 P.2d 1113.

¶ 8 The instant case requires us to decide whether section 38-1-18's use of the term "successful party" precludes a trial court from finding that, under circumstances such as those in this case, neither party was actually "successful," and therefore neither party is entitled to attorney fees. Reasoning that the term "successful party" is essentially synonymous with the term "prevailing party," Whipple II, 2002 UT App 73 at ¶¶ 11-12, 47 P.3d 92, the court of appeals held that a trial court should apply a "flexible and reasoned" approach to determining which party was successful. Id. at ¶¶ 16, 18-19. This approach is based on the court of appeals' reasoning in Mountain States II, which was not a mechanic's lien case, but rather one involving a contractual attorney fees provision that included the term "prevailing party." Mountain States I, 776 P.2d at 648. The court of appeals followed the flexible and reasoned approach it announced in Mountain States II in the subsequent case of Occidental/Nebraska Federal Savings Bank v. Mehr, 791 P.2d 217 (Utah Ct.App.1990).

I. MOUNTAIN STATES II

¶ 9 Mountain States II involved a dispute over the purchase of radio stations. Mountain States I, 776 P.2d at 645. The contract governing the purchase included an attorney fees provision providing, in pertinent part: "In the event of commencement of suit by either party to enforce the provisions of this Agreement, the prevailing party shall be entitled to receive attorneys' fees and costs as a court may adjudge reasonable in addition to any other relief granted." Id. at 648. The Mountain States trial court found that both sides had prevailed to some extent, so it awarded both sides their full attorney fees. Id. at 645. Both sides argued before the court of appeals, however, that the attorney fees provision in the purchase contract contemplated only one "prevailing party," and, predictably, each side claimed to be the prevailing party. Id. at 648.

¶ 10 In Mountain States I, the court of appeals found that there could be only one prevailing party, despite the fact that the trial judge had awarded both parties money damages for claims arising from the same transaction. Id. Furthermore, the court of appeals held that prevailing party status was determined by the identity of the party receiving the net judgment. Id. at 649. The court acknowledged, however, that

[t]he determination of a "prevailing party" becomes even more complicated in cases involving multiple claims and parties... and where the ultimate award of money damages does not adequately represent the actual success of the parties under the peculiar posture of the case. These cases demonstrate the need for a flexible and reasoned approach to deciding in particular cases who actually is the prevailing party.

Id. at 649 n. 7 (citations omitted).

¶ 11 Mountain States II was the court of appeals' memorandum decision on a petition for rehearing filed by Mountain States. 783 P.2d at 557. Mountain States had not received a net judgment in Mountain States I, and it was therefore not the "prevailing party" under the court's initial application of the net judgment rule. Mountain States argued that it was nevertheless the real prevailing party because throughout the trial it had claimed that it was entitled to an offset, and it ultimately did prove its entitlement to the offset. Id. Furthermore, Mountain States argued that its opponent — a party named NBA — was the non-prevailing party, because NBA had contended Mountain States deserved no offset, but an offset was nonetheless awarded. Id. The appellate court cogently explained why a strict application of an unmodified net judgment rule could create absurd results:

Mountain States suggests that the absurdity of our reliance on the "net judgment" rule in a case like this is shown by the fact that if it had proven offsets totaling even $1.00 less than the amount otherwise due under the note, despite a near-total victory for Mountain States the net judgment would still be in favor of NBA and strict

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