Kathryn Learner Family Trust v. James D. Wilson ( 2014 )

FILED
SEPTEMBER 4,2014
In the Office of the Clerk of Court
W A State Court of Appeals, Division III
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION THREE
Kathryn Learner Family Trust, ) No. 31581-9-III
)
Appellant, )
)
v. ) PUBLISHED OPINION
)
James Dean Wilson, individually and as )
administrator of the estate of Elsa Burgett; )
and John and Jane Does 1-10, )
)
Respondent and )
Cross-Appellants. )
LAWRENCE-BERREY, J. This case presents an issue of first impression in
Washington: Whether a prevailing party in a contract action is entitled to attorney fees
when it fails to assert such a right in response to a pleading that requests contractual
attorney fees. The lower court concluded that attorney fees are special damages under
CR 9(g), and that the failure to plead them prevents their award. We hold that CR 54(c)
creates an exception: Where, as here, the nonprevailing party makes a claim for
contractual attorney fees, such party has sufficient notice that attorney fees are awardable
so that CR 54(c) obligates their award to the prevailing party. We therefore reverse.
No. 31581-9-III
Kathryn Learner Family Trust v. Wilson
FACTS
The Kathryn Leamer Family Trust (Trust) leases property from James Wilson and
the Estate of Elsa Burgett (collectively Mr. Wilson). In September 2009, the Trust filed a
lawsuit against Mr. Wilson seeking a declaratory judgment concerning the parties' lease.
The Trust asked the court to interpret rent provisions of the lease, to determine the
amount the Trust owed to Mr. Wilson, and to direct the Estate to complete probate. The
complaint stated that it was not seeking a money award, and did not include a demand for
attorney fees.
By February 2010, Mr. Wilson had not answered the declaratory judgment action.
The Trust filed a motion for default judgment. On February 16, Mr. Wilson answered the
Trust's declaratory judgment complaint. In the same filing, he alleged a counterclaim
against the Trust for material breach of the lease and intentional misconduct and knowing
violation of the law. He requested monetary damages. Mr. Wilson also sought an award
of attorney fees and costs as provided by the lease contract. The Trust answered the
counterclaim, denied that the relief requested by Mr. Wilson was appropriate, but (again)
did not request an award of attorney fees.
In July 2011, the Trust moved for summary judgment on the declaratory relief
claim. It still did not request attorney fees. Eventually, on August 17,2012, the trial
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court granted summary judgment in favor of the Trust, adopting the Trust's interpretation
of the contract. Mr. Wilson voluntarily dismissed his counterclaim on September 14.
On September 24, the Trust filed a motion for an award of attorney fees,
requesting over $130,000. The Trust argued that it was entitled to attorney fees under the
express terms of the lease. The lease stated, "In the event of suit or action brought
because of or to enforce provisions herein, the prevailing party in such suit or action shall
be entitled to recover reasonable attorney fees in addition to such other relief as the Court
may grant." Clerk's Papers (CP) at 379. The Trust contended that it was the prevailing
party because the court entered summary judgment in favor of the Trust and because Mr.
Wilson voluntarily dismissed his counterclaim.
In a comprehensive letter opinion, the trial court denied the Trust's motion for
attorney fees. The court noted that the lease provided for an award to the prevailing
party, and determined that the Trust was the prevailing party. However, the court held
that the Trust's failure to plead contractual attorney fees barred its request. Specifically,
the Trust failed to serve upon Mr. Wilson a complaint that gave him fair notice of the
relief sought and the legal theory supporting the relief. The court explained that pleading
requires notice sufficient to allow the opposing party to make an informed decision at the
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inception of litigation, not only to consider the probability of success, but also to estimate
what might be lost or won in the enterprise.
The trial court, citing federal authority interpreting Fed. R. Civ. P. 9(g), held that
attorney fees are special damages under CR 9(g); and as special damages, if not pleaded,
were deemed waived. Additionally, the court determined that CR 54(c) could not be used
as a basis to support the Trust's request for attorney fees because CR 54(c) is reserved to
save a defective complaint only when the unpleaded issue is actually litigated at trial. The
Trust appeals.
ANALYSIS
We apply de novo review to a trial court's conclusion of whether it has a basis for
awarding attorney fees. Gander v. Yeager, 167 Wn. App. 638, 646-47, 282 P.3d 1100(2012).
The Trust contends that it is allowed attorney fees because attorney fees are
considered costs not damages. Based on State ex rei. A.N C. v. Grenley, 91 Wn. App.
919,930,959 P.2d 1130 (1998) and CR 54(d), the Trust maintains that a party is allowed
to recover costs regardless if such relief is requested in the complaint. Alternatively, the
Trust contends that the trial court was required to award attorney fees under CR 54(c),
which grants relief to the prevailing party if entitled, even if the party did not demand
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such relief in its pleadings. We agree with the Trust's alternative argument and,
therefore, decline to comment on Grenley and its analysis of CR 54(d).
Here, the Trust's right to recover attorney fees is provided by the lease. The lease
states that the prevailing party "shall be entitled to recover reasonable attorney fees in
addition to such other relief as the Court may grant." CP at 379.
The first question is whether a party must plead a right to recover attorney fees
when relying on a contractual provision as the basis for the award. We conclude that
attorney fees, when based on a contractual provision, are considered special damages that
generally must be pleaded.
Pleading a contractual entitlement to attorney fees is needed to give the opponent
notice of the claim. Common law requires that a party seeking attorney fees must bring
himself within the operation of some provision to be entitled to a judgment against his
opponent. State ex ref. Macri v. City ofBremerton, 8 Wn.2d 93, 112, 111 P.2d 612(1941). A complaint for relief should contain: "( 1) a short and plain statement of the
claim showing that the pleader is entitled to relief and (2) a demand for judgment for the
relief to which he deems himself entitled." CR 8(a). A pleading is insufficient when it
does not give the opposing party fair notice of a claim and the ground upon which it rests.
Lewis v. Bell, 45 Wn. App. 192, 197, 724 P.2d 425 (1986). "A party who does not plead
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a cause of action or theory of recovery cannot finesse the issue by later inserting the
theory into trial briefs and contending it was in the case all along." Dewey v, Tacoma
Sch. Dist. No. 10,95 Wn. App. 18,26,974 P.2d 847 (1999),
A party who claims attorney fees under a provision of a contract is demanding
material relief. The requesting party must give the opposing party notice of such a
request and the basis in law for the request. Contractual attorney fees are not available
for every contract and notice must be given that the attorney fee provision of the contract
is under review by the court. As stated by the trial court here, requiring a party to plead
attorney fees provides the opposing party not only with a "meaningful opportunity to meet
the merits of the pleader's claim, but also a chance to make an informed decision to
undergo the risks of litigation." CP at 792.
More specifically, attorney fees are special damages that must be pleaded when the
right to recover the fees arises from a contractual provision. '" General damages' are
those which are the natural and necessary result of the wrongful act or omission asserted
as the basis for liability. They are presumed by or implied in law to have resulted from
the injury." Jensen v. Torr, 44 Wn. App. 207, 214, 721 P.2d 992 (1986). In comparison,
'" [s ]pecial damages,' arising from the special circumstances of the case, are the natural,
but not the necessary, result of an injury and are not implied in law." Id. (citing 22 AM.
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JUR. 2d Damages § 15 (1965); 25 C.J .S. Damages § 2 (1966); see RESTATEMENT
(SECOND) OF TORTS § 904 (1979)). Attorney fees arise from the special circumstances of
the contract and are not implied by law. Thus, they are special damages. "When items of
special damage are claimed, they shall be specifically stated [in the complaint]."
CR 9(g). Indeed, federal courts have held that attorney fees are special damages that must
be specifically pleaded under Fed. R. Civ. P. 9(g). United Indus., Inc. v. Simon-Hartley,
Ltd., 91 F.3d 762, 764 (5th Cir. 1996) (citing Maidmore Realty Co., Inc. v. Maidmore
Realty Co., Inc., 474 F.2d 840, 843 (3rd Cir. 1973) ("Claims for attorney fees are items of
special damage which must be specifically pleaded under Federal Rule of Civil Procedure
9(g)."); W Cas. & Sur. Co. v. Sw. Bell Tel. Co., 396 F.2d 351,356 (8th Cir. 1968)
("Claims for attorneys' fees are also items of special damage which must be specifically
pleaded under Fed. R. Civ. P. 9(g)."); In re Am. Cas. Co., 851 F.2d 794, 802 (6th Cir.
1988); 5 CHARLES A. WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE & PROCEDURE
§ 1310 (1990)). "Failure to plead waives the right to attorneys' fees." Id. (citing
Maidmore, 474 F.2d at 843; Western, 396 F.2d at 356; 5 CHARLES A. WRIGHT & ARTHUR
R. MILLER, FEDERAL PRACTICE & PROCEDURE § 1312 (1990)).
The second question is whether there is any exception to the above general rule.
CR 54(c) provides that "[e]xcept as to a party against whom a judgment is entered by
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default, every final judgment shall grant the relief to which the party in whose favor it is
rendered is entitled, even if the party has not demanded such reliefin his pleadings." In
Allstot v. Edwards, 114 Wn. App. 625, 632, 60 P.3d 601 (2002), the court determined that
special damages were available to the plaintiff under CR 54(c) even though he did not
demand special damages in the complaint as required by CR 9(g). The plaintiff included
the issue of double damages in his brief two weeks before trial. Id. The court held, "[I]f
the trial court had found merit in Mr. Allstot's statutory claim for double damages, it was
obligated by CR 54(c) to grant that relief, even though the claim had not been included in
the original pleadings. Further, because the parties argued the issue and the trial court
ruled on it, it is treated as if it had been pleaded." Id. (emphasis added).
In Allstot, the plaintiff raised the issue of double damages two weeks before trial.
Here, Mr. Wilson raised the issue of attorney fees in February 2010, a full 18 months
before the court entered its August 2012 summary judgment in favor of the Trust. By
raising the issue of contractual attorney fees, Mr. Wilson acknowledged that he knew of
the attorney fee provision in the lease and that the prevailing party in the litigation would
be entitled to attorney fees. We hold that where the nonprevailing party actually knows
the basis for a contractual fee award and requests fees, that the failure of the prevailing
party to explicitly make such a request does not bar that party from later requesting
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contractual attorney fees. By raising the issue in his answer 18 months prior to the
litigation concluding, Mr. Wilson unquestionably had that type of notice intended by
CR 9(g), and we hold that it was error for the lower court to deny the Trust's request for
contractual attorney fees.
In sum, a claim for contractual attorney fees generally must be pleaded for such
relief to be granted. Contractual attorney fees are not automatically awarded to the
prevailing party but are special damages that must be pleaded. Pleading these special
damages allows the opposing party a meaningful opportunity to meet the merits of the
claim and a chance to make an informed decision. This general rule is subject to CR
54(c). Under that rule, the trial court is obligated to award reasonable attorney fees when
the issue is raised sufficiently before trial so that the nonprevailing party had sufficient
notice to make an informed decision of the risks and benefits of continued litigation. It
makes no difference which party raises the issue, because the requirement of notice to the
nonprevailing party is fulfilled regardless.
Both parties request attorney fees on appeal as the prevailing party. RAP 18.1
entitles a party to attorney fees on appeal if allowed by law. A party may be awarded
attorney fees based on a contractual fee provision at the trial and appellate court level.
Kaintz v. PLG, Inc., 147 Wn. App. 782, 785, 197 P.3d 710 (2008). The lease between the
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No.315S1-9-III
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Trust and Mr. Wilson allows for attorney fees to the prevailing party. Provided that the
Trust complies with RAP IS. I (d), it is awarded attorney fees on appeal.
We reverse and remand with directions for the lower court to award reasonable
attorney fees to the Trust incurred at that level.
Lawrence-Berrey, J.
WE CONCUR:
Brown, A.C.J.
:i s:
Fearing~ I
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