Marassi v. Lau

• Decision Date: 06 July 1993
• Docket Number: No. 30556-5-I,30556-5-I
• Citation: 859 P.2d 605,71 Wn.App. 912
• Court: Washington Court of Appeals
• Parties: Nicholas P. MARASSI and Debra A. Marassi, husband and wife, Respondents, v. Michael P.H. LAU and Joyce E. Lau, husband and wife, and the marital community composed thereof; Ralph W. Johnson and Jane Doe Johnson, husband and wife, and the marital community composed thereof; Defendants, and Dynasty Development Corporation, a Washington corporation, Appellant. Division 1

Page 912

71 Wn.App. 912

859 P.2d 605

Nicholas P. MARASSI and Debra A. Marassi, husband and wife, Respondents, v. Michael P.H. LAU and Joyce E. Lau, husband and wife, and the

marital community composed thereof; Ralph W. Johnson and

Jane Doe Johnson, husband and wife, and the marital

community composed thereof; Defendants,

and

Dynasty Development Corporation, a Washington corporation, Appellant.

No. 30556-5-I.

Court of Appeals of Washington,

Division 1.

July 6, 1993.

Reconsideration Denied Oct. 14, 1993.

Carl Goodwin, Seattle, for appellant.

Deane Minor, Seattle, for respondents.

GROSSE, Presiding Chief Judge.

The appellant, Dynasty Development Corporation (Dynasty), challenges the trial court's award of attorney fees to the respondents, Nicholas and Debra Marassi. The fees were awarded pursuant to a provision in the parties' purchase and sale agreement allowing the successful party in a suit to recover reasonable attorney fees. We reverse, holding that both parties prevailed on distinct issues requiring a proportional award of fees.

The Marassis contracted with Dynasty to purchase a lot in a housing development known as Windsor Shores located in Snohomish County. As part of the agreement, Dynasty agreed to make improvements to the lot and common areas of the development, including the installation of utilities, the construction of an access road and security gate, and the excavation of a building pad. In addition, the contract contained a provision for attorney fees in the event of a dispute:

In the event that either Buyer, Seller, or Agent, shall institute suit to enforce any rights hereunder, the successful party shall be entitled to court costs and a reasonable attorney's fee. In the event of trial, the amount of the attorney's fee shall be as fixed by the court.

Subsequent to the construction of the access road and building pad, inadequate drainage caused cracking and settling of concrete in the driveway and parking area, and an outburst of water and mud. Property damage occurred on the north and south slopes of the lot.

The Marassis filed suit against Dynasty for breach of contract, negligence, fraudulent conveyance, and misrepresentation. In the original complaint, the Marassis sought relief for the damage to the north and south slopes of the lot, damage for failure to properly hydroseed the lot and extend a water line, and delay damages. They also sought specific performance for the placement of underground utilities, the redesign and replacement of culverts, the planting of foliage and hydroseeding, reconstruction of the access road, and the completion of improvements to a security gate. Dynasty counterclaimed in the amount of $300 for damage to the security gate.

Prior to trial, the Marassis moved to amend their complaint under CR 15(a) and dismissed five of the specific performance claims, including the claims to replace the culverts, rebuild the access road, plant additional foliage above the road, complete the security gate, and repair and maintain the development's access road. The trial court granted the Marassis' motion and the five claims were dismissed without prejudice. The parties settled Dynasty's counterclaim and the Marassis' damages claim for extending a water line, which resulted in a net credit in favor of the Marassis for $153.

The seven remaining damages claims litigated at trial totalled $88,450. The trial court found in the Marassis' favor on a $15,000 claim for north slope damages and on the specific performance claim for laying underground utilities. The court dismissed the remainder of the claims with prejudice, including the claims for south slope damages, delay damages, failure to properly hydro-seed, fraudulent conveyance, and misrepresentation. The Marassis were awarded $153 for the offset of the settled claims. The trial court also awarded $12,285 in attorney fees to the Marassis as the prevailing parties, together with $118 in costs. Dynasty appeals the trial court's award of attorney fees. ¹

The purchase and sale agreement between Dynasty and the Marassis provided for the award of attorney fees to the "successful party" in a dispute. Because the majority of the Marassis' claims were dismissed, Dynasty argues that under the contract and RCW 4.84.330, the Marassis cannot be a prevailing party even though they received an affirmative judgment.

In general, a prevailing party is one who receives an affirmative judgment in its favor. ² Schmidt v. Cornerstone Invs., Inc., 115 Wash.2d 148, 164, 795 P.2d 1143 (1990); Ennis v. Ring, 56 Wash.2d 465, 473, 341 P.2d 885, 353 P.2d 950 (1959). An award of attorney fees to a prevailing party under RCW 4.84.330 is mandatory. Singleton v. Frost, 108 Wash.2d 723, 729, 742 P.2d 1224 (1987). When a contract clause allows the successful plaintiff to recover attorney fees, the clause applies bilaterally under RCW 4.84.330 ³ to allow successful defendants to recover also. Marine Enterprises, Inc. v. Security Pacific Trading Corp., 50 Wash.App. 768, 772, 750 P.2d 1290 (1988), review denied, 111 Wash.2d 1013 (1988) (citing Herzog Aluminum, Inc. v. General Am. Window Corp., 39 Wash.App. 188, 196-97, 692 P.2d 867 (1984)).

If neither party wholly prevails then the party who substantially prevails is the prevailing party, adetermination that turns on the extent of the relief afforded the parties. Rowe v. Floyd, 29 Wash.App. 532, 535 n. 4, 629 P.2d 925 (1981); Marine Enterprises, 50 Wash.App. at 772, 750 P.2d 1290. However, if both parties prevail on major issues, an attorney fee award is not appropriate. American Nursery Prods. v. Indian Wells Orchards, 115 Wash.2d 217, 235, 797 P.2d 477 (1990) (citing Sardam v. Morford, 51 Wash.App. 908, 756 P.2d 174 (1988)); Rowe v. Floyd, 29 Wash.App. at 535, 629 P.2d 925; Puget Sound Serv. Corp. v. Bush, 45 Wash.App. 312, 320-21, 724 P.2d 1127 (1986).

These general principles, however, do not address situations in which a defendant has not made a counterclaim for affirmative relief, but merely defends against the plaintiff's claims. Dynasty asserts that if a defendant successfully defends against the plaintiff's contract claims, it is a prevailing party entitled to attorney fees, citing Park v. Ross Edwards, Inc., 41 Wash.App. 833, 838, 706 P.2d 1097, review denied, 104 Wash.2d 1027 (1985); Meenach v. Triple "E" Meats, Inc., 39 Wash.App. 635, 640, 694 P.2d 1125, review denied, 103 Wash.2d 1031 (1985); Herzog Aluminum Inc., 39 Wash.App. at 197, 692 P.2d 867 (1984). The plaintiffs in each cited case were entirely unsuccessful and received no recovery; the defendants were deemed prevailing parties. ⁴ Similarly, this court in Marine Enterprises recognized that a successful defendant should be permitted to recover as a prevailing party.

In the case at hand, the Marassis did receive an affirmative judgment, but on only 2 of the original 12 claims. In this circumstance, we believe that application of the net affirmative judgment rule or "substantially prevailing" standard does not obtain a fair or just result. Under the affirmative judgment rule, the Marassis are prevailing parties because they received an affirmative judgment in their favor, even though Dynasty successfully defended against the majority of the claims. Similarly, the substantially prevailing standard set forth in Rowe v. Floyd does not adequately resolve the issue. Although appropriate in some cases, it fails on facts such as these where multiple distinct and severable contract claims are at issue. In such a situation, the question of which party has substantially prevailed becomes extremely subjective and difficult to assess.

We hold that when the alleged contract breaches at issue consist of several distinct and severable claims, a proportionality approach is more appropriate. A proportionality approach awards the plaintiff attorney fees for the claims it prevails upon, and likewise awards fees to the defendant for the claims it has prevailed upon. The fee awards are then offset.

The Marassis argue that a party need not prevail on its entire claim to be the prevailing party, relying on Silverdale Hotel Assocs. v. Lomas & Nettleton Co., 36 Wash.App. 762, 774, 677 P.2d 773 (1984). A proportionality approach is not inconsistent with Silverdale Hotel. The plaintiff in that case recovered approximately $600,000 in damages from a breach of contract claim, but was unable to prove other asserted consequential damages from the breach. The plaintiff was deemed the prevailing party even though it had not recovered its entire claim, the court noting that the defendant had not prevailed in the contract dispute. Silverdale Hotel, 36 Wash.App. at 774, 677 P.2d 773. Silverdale Hotel is also distinguishable. There the plaintiff was suing on a single breach of contract with several damages theories; it did not seek recovery for multiple distinct and severable breaches, as did the Marassis. ⁵

The Marassis also argue that under both the contract and RCW 4.84.330, the attorney fee award must be reasonable and that this reasonableness requirement sufficiently protects the defending party from an award that is disproportionate to the relief granted. Although the reasonableness requirement may prevent an excessively large award to a successful plaintiff in factual circumstances such as these, this argument ignores the defendant's right to receive fees and costs for those claims successfully defended. ⁶ The award of attorney fees to successful defendants is consistent with the underlying philosophy of fee-shifting: to discourage weak cases, encourage settlements, and restore a wronged party to its original position. See Talmadge, The Award of Attorneys' Fees in Civil Litigation in Washington, 16 Gonz.L.Rev. 57, 69-70 (1980). In sum, we hold that when several distinct and severable breach of contract claims are at issue, the defendant should be awarded attorney fees for those claims it successfully defends, and the plaintiff should be awarded...