Joseph v. Household Finance Corporation, No. 54667-8-I (WA 10/31/2005)
| Decision Date | 31 October 2005 |
| Docket Number | No. 54667-8-I,54667-8-I |
| Court | Washington Supreme Court |
| Parties | JOSEPH and JEANIE LUNA, husband and wife; CARL and BRENDA BENNETT, husband and wife, and DAVID J. MURPHY and GENEVEVE L. MURPHY, husband and wife, NEIL NELSON and ELSIE L. NELSON, husband and wife, and on behalf of themselves and all others similarly situated, Respondents/Cross-Appellants, v. HOUSEHOLD FINANCE CORPORATION, III, a foreign corporation doing business in the State o Washington; and HOUSEHOLD REALTY CORPORATION, a foreign corporation doing business in the State of Washington; and other related entities and subsidiaries. Appellants/Cross-Respondents. |
Appeal from Superior Court of Whatcom County. Docket No: 03-2-02673-1. Judgment or order under review. Date filed: 06/25/2004. Judge signing: Hon. Michael F Moynihan.
Counsel for Appellant/Cross-Respondent, Daniel J. Jr Dunne, Heller Ehrman LLP, 701 5th Ave Ste 6100, Seattle, WA 98104-7098.
Kenneth E Payson, Heller Ehrman LLP, 701 5th Ave Ste 6100, Seattle, WA 98104-7098.
Darwin P Roberts, Assistant US Attorney, 700 Stewart St Ste 5220, Seattle, WA 98101-1271.
Counsel for Respondent/Cross-Appellant, Richard Jerabek Jr, Davis Arneil Law Firm, PO Box 2136, Wenatchee, WA 98807-2136.
Robert Llewellyn Parlette, Attorney at Law, PO Box 2136, Wenatchee, WA 98807-2136.
Michael David Pierson, Riddell Williams PS, 1001 4th Ave Ste 4500, Seattle, WA 98154-1065.
Anthony L. Rafel, Rafel Manville PLLC, 999 3rd Ave Ste 1600, Seattle, WA 98104-4019.
Household Finance Corporation, III, and Household Realty Corporation entered into a settlement with various Washington home loan borrowers regarding their claims of fraud, negligent misrepresentation, and violations of the Consumer Protection Act in relation to the interest rates offered and charged by HFC. As part of the settlement, HFC granted the plaintiffs interest rate reductions on their loans and refunds for over-paid amounts. A trial court then awarded plaintiffs' attorney fees and costs and also granted special compensation to several key plaintiffs. Both parties appealed.
Because the Borrowers sued on the parties' loan documents and loan transactions, which included both the Deed of Trust and the Loan Repayment and Security Agreement, the plaintiffs could rely on an attorney fees provision in the deed as the basis to request the fees. The court did not err when it denied a multiplier on the attorney fee calculation. However, there was no legal basis for granting special compensation to various key plaintiffs. Affirmed in part, reversed in part.
In 2002, individuals in Bellingham, Washington (Jeanie and Joseph Luna Brenda and Carl Bennett, Geneveve and David Murphy, and Elsie and Neil Nelson — hereinafter collectively Borrowers) brought an action against Household Finance Corporation III and Household Realty Corporation (hereinafter HFC), the lenders of their home mortgages in Whatcom County Superior Court. Borrowers claimed that HFC had offered them favorable rates to refinance existing first lien home loans or establish second lien home loans, but Borrowers ended up with loans with much higher interest rates. Borrowers alleged that HFC had engaged in fraud in the inducement, negligent misrepresentation, and violations of the Consumer Protection Act (CPA). Borrowers sought to reform their `loan documents' and `contracts,' or to rescind their `loan transactions' and `contracts' with HFC. Borrowers sought class certification for all similarly affected HFC borrowers.
The case was removed to the U.S. District Court for the Eastern District of Washington, and then transferred to the U.S. District Court for the Western District of Washington. HFC moved to compel arbitration by individual proposed class members, and the parties engaged in extensive discovery regarding this motion. HFC's motion was denied in 2002, and HFC appealed. Borrowers also filed a motion for state-wide class certification, and the parties engaged in extensive discovery on this issue.
On October 10, 2002, after similar complaints by home loan borrowers in other states, HFC entered into a settlement with various state attorney generals
(AG Agreement). HFC agreed to set up a $484 million restitution fund for borrowers nationwide; $21 million was to be used for Washington residents. The AG Agreement expressly excluded an adjustment of interest rates on existing loans as part of the settlement. Borrowers' request for class certification in the original action against HFC in U.S. District Court for the Western District of Washington was denied, in part because of the existence of the AG Agreement. Borrowers appealed this decision. Borrowers then negotiated a separate settlement with HFC (Bellingham Settlement), agreeing to dismiss their appeal of denial of class certification in exchange for adjustment of interest rates on both first lien and second lien real estate loans retroactive to the date of the original loan, retroactive reduction of charged discount points, and credit of over-paid amounts. The Bellingham Settlement also provided for a payment of $50,000 by HFC into a cy pres fund to support loan borrower education, opportunities for partial refund of life insurance premiums, and hardship priority relief.1
On November 13, 2003, Borrowers re-filed their original complaint in Whatcom County Superior Court solely for the purpose of filing the settlement agreement, and dismissal of all claims in the complaint with prejudice. After notice of the settlement to between 260 and 276 potential class members, none opted out. The court gave final approval to the class settlement on April 22, 2004.
In March 2004, Borrowers sought $1,564,336.50 in attorney fees and $124,880.70 in costs, citing various terms of the settlement agreement, the CPA, and
the parties' loan agreements with HFC as authority for the award. Borrowers argued that attorney fees could be calculated through the lodestar method, and requested a multiplier of 2 to 3 for the contingent nature of the case and quality of work. Borrowers also requested special compensation between $10,000 and $20,000 for several key plaintiffs, citing various cases as authority.
HFC opposed the requests, arguing that the requests were not authorized by any of the cited authorities. Borrowers then provided new proposed findings of fact and conclusions of law that included an attorney fees award for work done after February 20, 2004, the award amount to be determined after submission of supplemental briefing and declarations supporting the request.
The trial court awarded Borrowers $782,168 in fees after reducing the requested amount for Borrowers' lack of success, duplicative efforts and other non-recoverable costs. The court stated that Borrowers had an `unfortunate lack of success in this proceeding,' and noted that while they had sought certification for 12,000 potential plaintiffs, class certification was denied and only 276 remained in the final settlement.2 The court also found `{t}here is no good reason for a multiplier.' The court awarded only statutory costs of $325, but granted special compensation of $10,000 to the Luna marital community, $5,000 to the Nelson marital community, $2,500 to the Bennett marital community, and $2,500 to the Murphy marital community. However, the court did not provide the legal basis on which it relied for the awards. The court also did not separately discuss whether Borrowers would be awarded attorney fees and costs for work done after February 20, 2004.
HFC appeals, arguing that the trial court erred in all awards to Borrowers. Borrowers cross-appeal, asserting that the trial court erred in its calculations of attorney fees and costs, and request that the award be remanded for re-calculation.
I. Authority for Attorney Fees and CostsUnder Washington law, attorney fees may be awarded only if authorized by contract, statute, or a recognized ground in equity. Bowles v. Washington Dep't of Ret. Sys., 121 Wn.2d 52, 70, 847 P.2d 440 (1993); Eaton v. Island County Juvenile Court, 48 Wn. App. 806, 814, 740 P.2d 907 (1987) (), rev'd on other grounds, 110 Wn.2d 892, 757 P.2d 961 (1988). `Whether a particular statutory or contractual provision, or recognized ground in equity, authorizes an award of attorney fees is a legal question which we review de novo.' Schlener v. Allstate Ins. Co., 121 Wn. App. 384, 388, 88 P.3d 993 (2004) (citing Tradewell Group, Inc. v. Mavis, 71 Wn. App. 120, 126-27, 857 P.2d 1053 (1993)).
The analysis of whether a particular statutory or contractual provision authorizes an award of attorney fees is usually straightforward. `{T}he relevant statute or contract either provides for an award of fees or it does not.' Tradewell Group, Inc., 71 Wn. App. at 126. We conclude that the trial court had sufficient basis for the fee award under the parties' existing loan agreements.
Borrowers argued to the trial court that an award of attorney fees and costs was supported by their loan documents and the fee-shifting provisions of RCW 4.84.330. Borrowers cited various sections of their loan documents which provide, in part:
7. Protection of Lender's Security. If Borrower fails to perform the covenants and agreements contained in this Deed of Trust; or if any action or proceeding is commenced which materially affects Lender's interest in the Property, then Lender, at Lender's option, upon notice to the Borrower, may make such appearances, disburse such sums, including reasonable attorneys' fees, and take such action as is necessary to protect Lender's interest. . . .
. . . .
17. Acceleration: Remedies. Except as provided in paragraph 16 hereof, or as otherwise required by law, upon Borrower's breach of any covenant or agreement of Borrower in this Deed of Trust,...
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