Dragt v. Dragt/Detray, LLC, 40171-1-II
| Decision Date | 25 September 2012 |
| Docket Number | No. 40171-1-II,Consolidated with No 41501-1-II,40171-1-II |
| Court | Washington Court of Appeals |
| Parties | HENRY DRAGT and JANE DRAGT, husband and wife, Appellants, v. DRAGT/DETRAY, LLC, a Washington limited liability company; and E. PAUL DETRAY and PHYLLIS DETRAY, and their marital community, Respondents. |
Armstrong, P.J. — In 1996, Henry and Jane Dragt formed a limited liability company with Paul DeTray for the purpose of developing a parcel of the Dragts' land. The Dragts eventually became frustrated with the progress of the development and, in 2004, they sold their land to a third party. DeTray sued and recovered damages for breach of contract. On appeal, we reversed the contractual damages award and remanded for the trial court to award DeTray unjust enrichment damages of $593,462.66 for his financial contribution to the project and quantum meruit damages, if any, for the reasonable value of his services.
On remand, the trial court awarded DeTray damages based on the extent his services increased the property's value. The Dragts appeal that award, arguing that the trial court erred (1) in calculating quantum meruit damages based on the increased value of the property, rather than the reasonable value of DeTray's services; (2) in awarding DeTray prejudgment interest; and (3) in awarding funds in the Thurston County Superior Court's registry to DeTray.
We hold that the trial court erred in calculating the quantum meruit damages; we reverse the award and remand for the trial court to dismiss DeTray's quantum meruit claim. We also hold that the trial court properly awarded prejudgment interest but calculated it using the wrong time period. On remand, the trial court must calculate interest from the date the Dragts sold the property to the date of our mandate. Finally, we hold that the trial court did not err when it distributed the funds in the court's registry to DeTray.
In 1996, the Dragts and DeTray formed a limited liability company, Dragt/DeTray LLC (LLC), to develop the Dragts' farmland. Dragt v. Dragt/DeTray, LLC, 139 Wn. App. 560, 564-65, 161 P.3d 473 (2007). In 1997, DeTray began making financial contributions to the LLC for the project, which totaled $593,462.66. Dragt, 139 Wn. App. at 567. The Dragts, however, became dissatisfied with the development's progress and, in 2004, they sold their land to a third party for $3,300,000. Dragt, 139 Wn. App. at 567-68.
To facilitate the sale, the Dragts and DeTray stipulated to deposit the net sale proceeds into the court's registry at closing, but they reserved "[a]ll rights, claims and arguments to or concerning those proceeds." Clerk's Papers (CP) at 543, 545. In exchange, DeTray released the lis pendens he had filed against the Dragts' real property. The stipulation further provided that "[t]he funds deposited into the registry of the Court shall not be released or disbursed without further order of this court." CP at 545. Under the stipulation, the Dragts deposited $70,704.93.
A month after closing, the third party buyer met with DeTray and offered to reimbursehim for his efforts in developing the land. Dragt, 139 Wn. App. at 568. DeTray never followed up on this offer. Dragt, 139 Wn. App. at 568.
In a previous appeal, we held that the Dragts benefited from "DeTray's financial contributions and services to the LLC during the development venture." Dragt, 139 Wn. App. at 575. Accordingly, we remanded for "an award of unjust enrichment against the Dragts for DeTray's costs, which amount to $593,462.66," and for the trial court to conduct a hearing to determine DeTray's damages under quantum meruit. We explained, "Because quantum meruit only allows restitution for a reasonable value for services, we remand for findings regarding the reasonable value of the benefit for the services DeTray conferred upon the Dragts." Dragt, 139 Wn. App. at 577.
At the hearing on remand, the trial court focused on the word "benefit" in our remand instructions and reasoned that the "proper way to determine the value of the benefit of the services DeTray performed is to calculate the increase in the value of the property due to all of DeTray's efforts." CP at 466-467. The trial court awarded DeTray $593,462.66 for his financial contributions, $367,946.85 in prejudgment interest on the financial contributions, and half the net surplus of the property sale, $784,295.25, for a total of $1,745,704.35. The Dragts appealed.
Four months later, the Dragts signed a security agreement with their attorneys, Ryan, Swanson, & Cleveland, PLLC (Ryan), granting Ryan a security interest in the court registry funds. Ryan then filed a financing statement to perfect its security interest in the funds on deposit with the court's registry. DeTray moved for an order releasing the registry funds to him. Thetrial court concluded that, under RCW 62A.9A-203,1 Ryan had no security interest in the deposited funds because "those funds were held in custodia legis, and thus [the Dragts] had no control over those funds at the time." CP at 787 (emphasis added). The trial court ordered that the registry funds be released to DeTray. The Dragts appealed. We stayed that ruling and consolidated the two appeals.
The trial court's judgment on remand raises an issue of law, which we review de novo: whether the trial court properly calculated DeTray's damages under quantum meruit. Sunnyside Valley Irrigation Dist. v. Dickie, 149 Wn.2d 873, 880, 73 P.3d 369 (2003) ().
"[Q]uantum meruit" literally means "as much as he deserved." Losli v. Foster, 37 Wn.2d 220, 233, 222 P.2d 824 (1950). Courts use quantum meruit to compensate an individual for the reasonable value of the services he or she has provided to another. See Schuehle v. City of Seattle, 199 Wash. 675, 683, 92 P.2d 1109 (1939); Young v. Young, 164 Wn.2d 477, 485, 191 P.3d 1258 (2008).
In our previous opinion, we explained that quantum meruit and unjust enrichment2 aredistinct methods of recovery. Dragt, 139 Wn. App. at 576-77. We provided a specific award for DeTray's recovery under unjust enrichment, $593,462.66, and we specifically directed the trial court to award further damages under quantum meruit. Dragt, 139 Wn. App. at 577.
On remand, the Dragts moved for summary judgment because DeTray had presented no evidence of the market value of his services. In their motion, the Dragts correctly argued that our mandate was clear and allowed the court to award additional damages only for quantum meruit. In response, DeTray asserted that we had remanded for an additional award of unjust enrichment and argued only for damages based on the increased fair market value of the property. DeTray presented no evidence of the reasonable value of his services. The trial court accepted DeTray's argument, focusing on the word "benefit" within the phrase "reasonable value of the benefit for the services." Report of Proceedings (RP) at 101-02.
The word "benefit" within the quantum meruit remand instructions may appear ambiguous if considered in isolation. "Benefit" may mean DeTray's services as measured by the property's increased value; or, "benefit" may mean that which is traditionally compensable under quantum meruit (i.e., the measure of the fair market value of DeTray's services that benefited the Dragts, such as adding infrastructure to the development). Washington cases have consistently measured quantum meruit damages by the reasonable value of the claimant's services, not the increased value of the property.3 In Modern Builders, Inc. of Tacoma v. Manke, 27 Wn. App. 86,93, 95, 615 P.2d 1332 (1980), we specifically addressed whether a court can award damages based on the increased fair market value of property when awarding quantum meruit damages. The trial court, under a quantum meruit theory, had awarded damages based on the increase in fair market value of the house due to the plaintiff's services. Modern Builders, 27 Wn. App. at 91. We overturned the trial court's award, explaining:
[W]hen quantum meruit recovery is allowed for extra or additional work, the measure of damages is the costs incurred by the performing party expressed as the cost of labor, materials and a reasonable allowance for profit, not the enhanced value to the estate of the party receiving performance. Therefore, the trial court erred in basing the damage computation on the increased value of defendants' house after completion of the remodeling by plaintiff, rather than upon proof of plaintiff's actual costs.
Modern Builders, 27 Wn. App. at 95 n.3.
Other Washington cases have used the "reasonable value of the benefit conferred" language and, in each case, the court properly awarded quantum meruit damages for the reasonable value of the claimant's services or remanded to the trial court to determine other dispositive issues before calculating potential quantum meruit damages. Ducolon Mech., Inc. v. Shinstine/Forness, Inc., 77 Wn. App. 707, 712, 893 P.2d 1127 (1995) (); Bort v. Parker, 110 Wn. App. 561, 580, 42 P.3d 980 (2002) (); RWR Mgmt., Inc. v. Citizens Realty Co., 133 Wn. App. 265, 277, 135 P.3d 955 (2006) (). Thus, the Washington casesresolve any possible ambiguity in our remand language: the word "benefit" does not establish a new measure of quantum meruit damages, it merely requires that the services rendered benefit the receiver of the services. Accordingly, the trial court erred by calculating quantum meruit based on the increased value of the property, rather than on the value of the services rendered.
Finally, to recover quantum meruit damages, DeTray...
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