Collins v. First Financial Services, Inc.

• Decision Date: 25 July 1991
• Docket Number: No. 1,CA-CV,1
• Citation: 815 P.2d 411,168 Ariz. 484
• Parties: Michael COLLINS, an unmarried man, Plaintiff-Appellee, Chrysler First Credit Corporation, a Delaware corporation, Defendant, Cross Defendant-Appellee, v. FIRST FINANCIAL SERVICES, INC., an Arizona corporation, Defendant, Cross Claimant-Appellant. 89-507.
• Court: Arizona Court of Appeals

Page 411

815 P.2d 411

168 Ariz. 484

Michael COLLINS, an unmarried man, Plaintiff-Appellee, Chrysler First Credit Corporation, a Delaware corporation, Defendant, Cross Defendant-Appellee, v. FIRST FINANCIAL SERVICES, INC., an Arizona corporation, Defendant, Cross Claimant-Appellant.

No. 1 CA-CV 89-507.

Court of Appeals of Arizona,

Division 1, Department A.

July 25, 1991.

[168 Ariz. 485] Stanley M. Hammerman, P.C. by Stanley M. Hammerman, Jon R. Hultgren, Phoenix, for defendant, cross defendant-appellee.

Robbins & Green, P.A. by Janet B. Hutchison, Sally C. Shanley, Phoenix, for defendant, cross claimant-appellant.

OPINION

CONTRERAS, Judge.

Appellant, First Financial Services, Inc. ("First Financial"), appeals from the trial court's ruling that it is not entitled to recover as part of its conversion damages against appellee, Chrysler First Credit Corporation ("Chrysler"), attorneys' fees incurred in a quiet title action brought against First Financial by a third party, Michael Collins ("Collins"). The issue on appeal is whether First Financial, which obtained a judgment against Chrysler for conversion, is entitled to recover these attorneys' fees as an element of its conversion damages. We conclude that because First Financial's defense against the third party's quiet title action was necessitated by Chrysler's conversion, First Financial is entitled to recover its reasonable attorneys' fees under the "tort of another" exception to the general rule against awarding attorneys' fees in the absence of a statute or agreement of the parties providing for such an award. We therefore reverse and remand for further proceedings to determine the amount First Financial is entitled to recover.

FACTS AND PROCEDURAL BACKGROUND

This case arises from a quiet title action filed on February 23, 1987, by Collins against First Financial seeking to clear title to a mobile home that Collins claimed to have previously purchased, together with real property, at a trustee's sale held by T.D. Service Company of Arizona ("T.D."). The trustee's sale was held by T.D. on behalf of Chrysler, which was the beneficiary under a deed of trust encumbering the mobile home and certain real property. First Financial claims to have held a lien on the mobile home senior to the lien of Chrysler's deed of trust, which Collins acquired. Although First Financial committed various errors in properly recording its lien, ¹ there was evidence that Chrysler was aware of First Financial's senior lien on the mobile home and acknowledged that First Financial had a superior interest regarding the mobile home.

After the trustee's sale, disagreements arose between T.D., Collins, First Financial and Chrysler as to whether the mobile home had been included in the sale. The initial trustee's deed granting the property to Collins did not contain a legal description of the mobile home. T.D. and Chrysler both initially denied that the mobile home had been included in the sale. However, upon the request of Collins' attorney, T.D. later recorded another trustee's deed that did contain a description of the mobile home. Collins then instituted the quiet title action against First Financial. First Financial added Chrysler as an additional defendant and cross-claimed against Chrysler for conversion damages. Subsequently, the trial court granted Collins' motion for partial summary judgment against First Financial on the issue of title to the mobile home. The trial court also granted First Financial's motion for summary judgment against Chrysler on the issue of liability for conversion. The court reserved the issue of the amount of conversion damages. In granting both of the motions, the trial court ruled that Collins was a bona fide purchaser of the mobile home and held a clear title to it. The court later awarded Collins $10,000.00 in attorneys' fees against First Financial.

First Financial and Chrysler stipulated that the value of First Financial's converted interest in the mobile home was $20,169.61. The parties also agreed to submit briefs to the court on the issue of whether First Financial was entitled to recover from Chrysler as part of its conversion damages the attorneys' fees assessed against it in connection with Collins' quiet title action, as well as its own attorneys' fees expended in that action. After First Financial and Chrysler submitted their briefs on this issue, the trial court ruled that First Financial was not entitled to such fees as part of its conversion damages.

CONVERSION DAMAGES

The Arizona courts have stated that the measure of conversion damages includes not only the value of the property taken, but also other damage suffered because of the wrongful detention or deprivation of the property, such as damages for loss of use. See Phelps v. Melton, 14 Ariz.App. 296, 297, 482 P.2d 905, 906 (1971). This statement of the law is consistent with the Restatement (Second) of Torts, which states that damages for conversion include "the amount of any further pecuniary loss of which the deprivation has been a legal cause[.]" Restatement (Second) of Torts § 927(2)(b) (1979). First Financial acknowledges that the attorneys' fees it incurred in its conversion action against Chrysler are not recoverable. ² However, First Financial argues that Chrysler's conversion of its interest in the mobile home (i.e. the sale to Collins) caused First Financial to have to defend itself in the quiet title action and, therefore, the expenses that First Financial incurred in connection with the quiet title action are part of its conversion damages. Chrysler points out, however, that this contention is in apparent conflict with the "American Rule" that litigants are generally not entitled to recover their attorneys' fees in either the same or a subsequent suit unless provided by statute or by agreement of the parties. See United States Fidelity & Guaranty Co. v. Frohmiller, 71 Ariz. 377, 379, 227 P.2d 1007, 1008 (1951). However, the Arizona courts have recognized certain exceptions to this general rule.

The Arizona Supreme Court has described one of the exceptions to the general rule prohibiting awards of attorneys' fees as follows:

It is generally held that where the wrongful act of the defendant has involved the plaintiff in litigation with others or placed him in such relation with others as makes it necessary to incur expenses to protect his interest, such costs and expenses, including attorneys' fees, should be treated as the legal consequences of the original wrongful act and may be recovered as damages.

United States Fidelity & Guaranty Co. v. Frohmiller, 71 Ariz. 377, 380, 227 P.2d 1007, 1009 (1951) (quoting 15 Am.Jur. Damages § 144) (1938)).

This exception is also embodied in the Restatement (Second) of Torts § 914(2) (1979), which states:

One who through the tort of another has been required to act in the protection of his interests by bringing or defending an action against a third person is entitled to recover reasonable compensation for loss of time, attorney fees and other expenditures thereby suffered or incurred in the earlier action.

The foregoing exception, known as the "tort of another" exception, has been widely recognized in other jurisdictions. See Annot., 45 A.L.R.2d 1183 (1956); 22 Am.Jur.2d Damages § 618 (1988). As generally applied, in order to recover attorneys' fees under this exception, the plaintiff must show that: (1) he became involved in a legal dispute because of the defendant's tortious conduct; (2) the dispute was with a third party; (3) the plaintiff incurred attorneys' fees in connection with that suit; (4) the expenditure of attorneys' fees was a foreseeable or necessary result of the tortious conduct; and (5) the claimed fees are reasonable. 22 Am.Jur.2d Damages § 621 (1988).

First Financial claims that all of the above elements ³ have been satisfied here because Chrysler's conversion of the mobile home by its sale to Collins caused First Financial to have to defend itself against Collins' quiet title action in order to protect its interest in the mobile home, and First Financial incurred attorneys' fees in that action ⁴ in addition to the attorneys' fees that were awarded to Collins.

Chrysler asserts that First Financial should not be able to recover the attorneys' fees under the "tort of another" exception because First Financial's involvement in the quiet title action was the result of its own "unfounded assertion of ownership or lienhold status superior to [Collins'] interest" and because Collins' success in that action was due to First Financial's own failure to properly record its lien so that record notice would be provided to any purchaser and First Financial's failure to attend the trustee's sale, despite receiving notice of that sale. In support of its position, Chrysler relies on Brochner v. Western Insurance Company, 724 P.2d 1293 (Colo.1986), in which the Colorado Supreme Court stated that the "tort of another" exception to the general rule prohibiting attorneys' fees awards applied "only if the party seeking such attorney fees was without fault as to the underlying action." 724 P.2d at 1300. Chrysler also relies on State Department of Environmental Protection v. Ventron Corporation, 94 N.J. 473, 468 A.2d 150 (1983) and Conrad v. Suhr, 274 N.W.2d 571 (N.D.1979) to support this proposition.

Brochner and Conrad are not analogous to the present case because both of those cases involved claims for indemnity and contribution among joint tortfeasors. In both of those cases, there was a prior lawsuit in which a plaintiff sued multiple defendants on various claims, but the defendants seeking attorneys' fees had not been found liable. The exonerated defendants then sought indemnity against the "guilty" defendants for attorneys' fees and costs incurred in connection with the lawsuits. Both courts declined to allow these co-defendants to recover attorneys' fees from the others because, in the prior lawsuits, both...