Dauphin v. Smith

• Decision Date: 02 January 1986
• Docket Number: No. 6870-2-II,6870-2-II
• Citation: 42 Wn.App. 491,713 P.2d 116
• Parties: Gilbert O. DAUPHIN, Respondent, v. Mark Frederick SMITH and Lynda Colleen Smith, husband and wife; Woodmark, Inc.; Old National Bank of Washington, Defendants, and Joseph DePietro and Irene DePietro, husband and wife; Gary Piercey and Shelley Jo Piercey, husband and wife; Shelley Jo Piercey, individually; John David Mascioli and Rebecca Mascioli, husband and wife, Pete Berolatti and Joan Berolatti, husband and wife, d/b/a DPPMB Associates, a joint venture, Appellants, and Pierce County Escrow Co., Inc., Third Party Defendant.
• Court: Washington Court of Appeals

Page 491

42 Wn.App. 491

713 P.2d 116

Gilbert O. DAUPHIN, Respondent, v. Mark Frederick SMITH and Lynda Colleen Smith, husband and wife; Woodmark, Inc.; Old National Bank of Washington, Defendants and Joseph DePietro and Irene DePietro, husband and wife; Gary Piercey and Shelley Jo Piercey, husband and wife; Shelley Jo Piercey, individually; John David Mascioli and Rebecca Mascioli, husband and wife, Pete Berolatti and Joan Berolatti, husband and wife, d/b/a DPPMB Associates, a joint venture, Appellants and Pierce County Escrow Co., Inc., Third Party Defendant.

No. 6870-2-II.

Court of Appeals of Washington Division 2.

Jan. 2, 1986.

Brian T. Comfort, Billett, Comfort & Rosenow, Tacoma, for appellants.

Kathleen B. Ebert, Bonneville, Viert, Morton & McGoldrick, Tacoma, for respondent.

REED, Acting Chief Justice.

DPPMB Associates (DPPMB) appeals an award of attorney's fees levied against it in favor of the plaintiff, Gilbert Dauphin, on a theory of equitable indemnity. The trial court was persuaded that DPPMB had acted wrongfully in refusing Dauphin's demands and had thereby forced him to initiate his suit. We conclude that DPPMB did not act wrongfully and was acting reasonably to protect its interests. We therefore reverse the award of attorney's fees to Dauphin.

Dauphin sold a commercial building to Mark and Lynda Smith and their corporation, Woodmark, Inc., on a real estate installment sales contract. The Smiths agreed to insure the property. If the building was destroyed, the Smiths would either use the money to reconstruct the building or pay off the balance then owed to Dauphin. The Smiths then resold the property on contract to DPPMB Associates. DPPMB agreed to insure the property to full value and in the event of a loss, to rebuild or pay off the contract balance with any insurance proceeds. The contract included the usual attorney fee provisions.

DPPMB immediately leased back the building to the Smiths. The Smiths, now lessees, agreed again to insure the property, this time for DPPMB's benefit. The Smiths insured the building for $218,000.

The building was destroyed by fire, and the insurer issued and delivered to Smith a check for $218,000, payable jointly to the Smiths, Woodmark, DPPMB and the Old National Bank (ONB). ¹ DPPMB, claiming that Smith had breached its agreements in several respects, including failing to insure the property to its full value, asserted that the proceeds should be used by the Smiths to rebuild. Dauphin, however, sought full payment from the Smiths on his sales contract, which then had an outstanding balance of about $167,000. Dauphin insisted that all of the payees indorse the check to him. From the $218,000 proceeds, he would retain the $167,000 due to him. It is not clear what was to become of the remainder.

DPPMB offered to indorse the check if Dauphin and all the payees would agree to place the proceeds in escrow until all of the various claims had been resolved. Dauphin, however, refused to cooperate, and sued the Smiths, Woodmark, ONB and DPPMB for a declaration that he was entitled to the balance owed on the Dauphin/Smith contract, for an order that all the defendants indorse the check for payment to him, and for an order that he should, after drawing his $167,000, deposit the residue with the clerk of court for later disposition.

Dauphin moved for summary judgment and the Smiths immediately tendered the check to the court, asserting that they were prepared to pay off the Dauphin/Smith contract if the other joint payees would indorse the check. On December 23, 1982, the court granted summary judgment to Dauphin, ordering all payees on the check to indorse it. However, the court ordered the payees to negotiate the check to the clerk of court and the clerk then to pay Dauphin his judgment for $167,000. The balance remaining was to be held by the court pending the resolution of the competing claims of the Smiths, ONB and DPPMB. The court awarded $1,500 in attorney's fees to Dauphin against DPPMB.

DPPMB sought reconsideration, limited to the question of attorney's fees. The court denied reconsideration, finding that Dauphin had demanded DPPMB's indorsement of the check and that DPPMB had refused it. It found that this refusal was an act wrongful toward Dauphin, that the refusal had involved Dauphin in litigation with third parties, the Smiths, and that the Smiths were in no way connected with DPPMB's wrongful act. ²

The rule in Washington is that "In absence of contract, statute, or recognized ground of equity, a court has no power to award an attorney's fee as part of the costs of litigation." State ex rel. Macri v. Bremerton, 8 Wash.2d 93, 113-14, 111 P.2d 612 (1941). Here, there were two separate contracts of sale: Dauphin to Smith and Smith to DPPMB. Thus, there was no privity of contract between Dauphin and DPPMB that would permit Dauphin to enforce against DPPMB the attorney's fees provision of his contract. No statute provides for attorney's fees in these circumstances. We must, therefore, look to some recognized ground of equity for such an allowance.

When the natural and proximate consequences of a wrongful act of A involve B in litigation with others, B may as a general rule recover damages from A for reasonable expenses incurred in that litigation, including attorney's fees.

Three elements are necessary to create liability: (1) a wrongful act or omission by A toward B; (2) such act or omission exposes or involves B in litigation with C; and (3) C was not connected with the initial transaction or event, viz., the wrongful act or omission of A toward B.

Manning v. Loidhamer, 13 Wash.App. 766, 769, 538 P.2d 136, review denied, 86 Wash.2d 1001 (1975). See also North Pacific Plywood, Inc. v. Access Road Builders, Inc., 29 Wash.App. 228, 236, 628 P.2d 482, review denied, 96 Wash.2d 1002 (1981).

Dauphin asserts that DPPMB wrongfully interfered in his contractual relationship with the Smiths by making it impossible for them to pay off the balance owed on their contract with him. A prima facie case for this tort is made out by proof of: (1) the existence of a valid contractual relationship; (2) knowledge of the relationship on the part of the interferor; (3) intentional interference inducing or causing a breach of the relationship; and (4) resultant damage to the party whose relationship has been disrupted. Calbom v. Knudtzon, 65 Wash.2d 157, 162-63, 396 P.2d 148 (1964); accord, Restatement (Second) of Torts § 766 (1979).

Even if a prima facie case is made out, one who in good faith asserts a legally protected interest of his own that he believes may be impaired by the performance of a contract between others is not guilty of tortious interference. Quadra Enters. v. R.A. Hanson Co., 35 Wash.App. 523, 527-28, 667 P.2d 1120 (1983); Singer Credit Corp. v. Mercer Island Masonry, Inc., 13 Wash.App. 877, 884, 538 P.2d 544 (1975); accord, Restatement (Second) of Torts § 773 (1979). Further, we agree with the Supreme Court of California that:

if two parties have separate contracts with a third, each may resort to any legitimate means at his disposal to secure performance of his contract even though the necessary result will be to cause a breach of the other contract.

Imperial Ice Co. v. Rossier, 18 Cal.2d 33, 35, 112 P.2d 631, 633 (1941). ³

We think that DPPMB's refusal to indorse the check was far from wrongful. The Smiths had obligations under contracts with both Dauphin and DPPMB, and DPPMB was therefore entitled to try to obtain the performance that it, correctly or incorrectly, believed was due under its contract. The law provided means for any of these parties to test this claim against Dauphin's. It is true that the Smiths, as stakeholders with an interest in the common fund themselves, could not have interpleaded the other claimants, in the strict sense of statutory interpleader. RCW 4.08.160; State Bank of Wilbur v. Wilbur Mission Church, 44 Wash.2d 80, 89, 265 P.2d 821 (1954); Stusser v. Mutual Union Ins. Co., 127...