Karrenberg v. Warnick, 20110553–CA.

• Decision Date: 04 October 2012
• Docket Number: No. 20110553–CA.,20110553–CA.
• Citation: 718 Utah Adv. Rep. 5,2012 UT App 275,289 P.3d 600
• Parties: ANDERSON & KARRENBERG, Plaintiff and Appellee, v. JERRY WARNICK; Martin Tanner; David Thayne; and Heritage Communications, Inc., Defendant and Appellant.
• Court: Utah Court of Appeals

289 P.3d 600

718 Utah Adv. Rep. 5

2012 UT App 275

ANDERSON & KARRENBERG, Plaintiff and Appellee,

v.JERRY WARNICK; Martin Tanner; David Thayne; and Heritage Communications, Inc., Defendant and Appellant.

No. 20110553–CA.

Court of Appeals of Utah.

Oct. 4, 2012.

Brian W. Steffensen and Larry G. Reed, Salt Lake City, for Appellant.

Samantha J. Slark, Salt Lake City, for Appellee.

OPINION

McHUGH

, Judge:

¶ 1 Jerry Warnick appeals the trial court's order denying his request for attorney fees incurred in defending against a legal action brought against him by the law firm Anderson & Karrenberg (A & K). In particular, Warnick contends that he was the prevailing party in the action, that the action was based upon a written contract containing a unilateral attorney fees provision, and that he is therefore entitled to his fees pursuant to Utah Code section 78B–5–826

(the Reciprocal

Fee Statute).^FN1

See Utah Code Ann § 78B–5–826 (LexisNexis 2008). We affirm.

BACKGROUND

¶ 2 Warnick entered into an agreement (the Agreement) with A & K, which provides that he would pay attorney fees and costs associated with A & K's representation of him in certain legal matters (the Co–Connect Dispute). The Agreement states, “In the event that sums payable under this agreement become the subject of litigation, your signature constitutes your agreement to pay all collection costs, including attorneys' fees, incurred in the enforcement of [the Agreement].” After Warnick executed the Agreement, A & K entered an appearance on his behalf in the Co–Connect Dispute, which was eventually resolved through settlement.

¶ 3 Subsequently, a dispute arose over the attorney fees due under the Agreement and A & K filed a complaint against Warnick asserting breach of contract and unjust enrichment (the Collection Action). On its breach of contract claim, A & K sought a judgment of $50,810 in principal, $2,323 in accrued interest, and continuing interest at 18% per annum as provided in the Agreement. In addition, A & K sought reimbursement of the “[a]ttorneys' fees and costs incurred by [it] in [the Collection Action].” With respect to its unjust enrichment claim, A & K requested judgment against Warnick for the principal amount of $50,810, accrued interest of $7,141, and continuing interest of 10% per annum at the legal interest rate, but did not seek the attorney fees incurred in the Collection Action.

¶ 4 In response, Warnick filed an answer and counterclaim. Warnick's answer denied the allegations in the complaint and alleged that A & K had promised that the attorney fees incurred in the Co–Connect Dispute would not exceed $20,000. Warnick also claimed that he was entitled to recover his attorney fees incurred in the Collection Action because it had been filed in bad faith. In addition, Warnick's counterclaim alleged that A & K had fraudulently induced him to enter into the Agreement. As relief, Warnick sought actual and consequential damages of $100,000, punitive damages of $1 million, and the reimbursement of attorney fees that he incurred in the Collection Action. ^FN2

¶ 5 Approximately three weeks later, A & K filed a motion and supporting memorandum for summary judgment on Warnick's fraud counterclaim and on his claim that the Collection Action had been filed in bad faith. After full briefing and argument, the trial court entered a judgment and order granting A & K's motion for summary judgment and dismissing Warnick's counterclaim for fraud, as well as his request for attorney fees under Utah Code section 78B–5–825

. The trial court reasoned that Warnick had “failed to establish three essential elements of [his] claim ... for fraud” and that he had “failed to show that [the Collection Action] was filed in bad faith.” Warnick has not challenged this ruling on appeal.

¶ 6 The case proceeded to trial on A & K's breach of contract and unjust enrichment claims against Warnick. The jury returned a special verdict finding that Warnick had contracted to pay attorney fees to A & K in connection with the Co–Connect Dispute and that those fees were not capped at $20,000. Nevertheless, the jury found that A & K inexcusably failed to perform its obligations under the Agreement and that Warnick did not owe A & K any unpaid attorney fees.

¶ 7 After trial, Warnick filed a motion and supporting memorandum, seeking an award of his attorney fees incurred “as the prevailing party” in the Collection Action. A & K filed an opposition memorandum, arguing that Warnick was not the prevailing party because his fraud claim and his request for bad faith attorney fees had been summarily resolved in A & K's favor before trial. A & K also argued that under section 78B–5–826

, the trial court had the discretion to award fees, and that the circumstances of this case did not support such an award. In particular, A & K claimed that the trial court should not award fees to Warnick because, under Utah law, A & K could not have collected its fees for the time spent by its own lawyers in the Collection Action. Warnick replied, arguing that he was the prevailing party because he had defeated A & K's attempts to collect attorney fees related to the Co–Connect Dispute and that A & K's decision not to hire outside counsel should not affect his right to the attorney fees he incurred in defending the Collection Action. After supplemental briefing, the trial court issued a written decision determining that neither party had prevailed and denying Warnick's motion for attorney fees. Warnick appeals from that decision.

ISSUE AND STANDARDS OF REVIEW

[1]

¶ 8 On appeal, Warnick challenges the trial court's ruling that he was not entitled to his attorney fees under the Reciprocal Fee Statute because he was not the prevailing party in the Collection Action. See Utah Code Ann. § 78B–5–826 (LexisNexis 2008). “Whether attorney fees are recoverable in an action is a question of law, which we review for correctness.” Valcarce v. Fitzgerald, 961 P.2d 305, 315 (Utah 1998). In contrast, “we review a trial court's determination of whether there is a prevailing party under an abuse of discretion standard.” Reighard v. Yates, 2012 UT 45, ¶ 12, 285 P.3d 1168 (citing R.T. Nielson Co. v. Cook, 2002 UT 11, ¶ 25, 40 P.3d 1119).^FN3

ANALYSIS

I. The Reciprocal Fee Statute

[2]

¶ 9 As a general rule, attorney fees are recoverable only if authorized by contract or statute. See id. ¶ 41 (citing Prince v. Bear River Mut. Ins. Co., 2002 UT 68, ¶ 52, 56 P.3d 524). Here, the attorney fees provision in the Agreement is unilateral, providing that Warnick is obligated to pay A & K's attorney fees but not conferring a reciprocal right on Warnick. Thus, Warnick cannot establish a contractual right to attorney fees. Instead, he claims fees pursuant to the Reciprocal Fee Statute, which provides,

A court may award costs and attorney fees to either party that prevails in a civil action based upon any promissory note, written contract, or other writing executed after April 28, 1986, when the provisions of the promissory note, written contract, or other writing allow at least one party to recover attorney fees.

Utah Code Ann. § 78B–5–826

.

[3]

[4]

¶ 10 The plain language of the Reciprocal Fee Statute indicates that “a court may award costs and attorney fees to a prevailing party in a civil action if two main conditions are met.” Bilanzich v. Lonetti, 2007 UT 26, ¶ 14, 160 P.3d 1041. The first condition is that “the civil action must be ‘based upon any ... written contract,’ ” and the second is that the contract “must ‘allow at least one party to recover attorney's fees.’ ” Id. (quoting Utah Code Ann. § 78–27–56.5 (Michie 2002)) (current version at id. § 78B–5–826 (LexisNexis 2008)); see also Hooban v. Unicity Int'l, Inc. (Hooban II), 2012 UT 40, ¶ 12, 285 P.3d 766 (citing Utah Code Ann. § 78B–5–826). A prerequisite to either of these conditions, however, is that the party requesting fees prevailed in a civil action based upon a written agreement. See Utah Code Ann. § 78B–5–826 (providing that the court may award attorney fees to a “party that prevails”); see also Hooban II, 2012 UT 40, ¶ 12, 285 P.3d 766.

II. The Prevailing Party

[5]

[6]

[7]

¶ 11 “Which party is the prevailing party is an appropriate question for the trial court” and “depends, to a large measure, on the context of each case.” R.T. Nielson Co., 2002 UT 11, ¶ 25, 40 P.3d 1119. We defer to the trial court on the question of which party prevailed because it is in the best position to make that determination, after considering factors such as

(1) [the] contractual language, (2) the number of claims, counterclaims, cross-claims, etc., brought by the parties, (3) the importance of the claims relative to each other and their significance in the context of the lawsuit considered as a whole, and (4) the dollar amounts attached to and awarded in connection with the various claims.

Id.

We refer to these factors as the Nielson factors. See id. This case-by-case approach affords the trial court the “flexibility to handle circumstances where both, or neither, parties may be considered to have prevailed.” See id.

[8]

¶ 12 Here, the trial court adopted a “flexible and reasoned” approach to deciding the prevailing party issue. The trial court's written decision begins with an overview of the facts and the relevant law, including the Nielson factors. It then uses a table illustrating the outcomes of the claims and counterclaims (the Table) to support its conclusion that “neither party is a ‘prevailing party.’ ” Although the Table lacks detail, it is adequate to illustrate the trial court's reasoning for purposes of our review. Compare A.K. & R. Whipple Plumbing & Heating v. Guy, 2004 UT 47, ¶¶ 28–30, 94 P.3d 270 (stating that “[a]lthough lacking in detail, the trial court's explanation of its rationale [was] adequate because it demonstrates that the court correctly considered common sense factors in addition to the new judgment” in reaching its determination that neither party was the “successful party”) with J....