Marassi v. Lau

Citations: 859 P.2d 605; 71 Wash. App. 912; 1993 Wash. App. LEXIS 288Docket: 30556-5-I

Court: Court of Appeals of Washington; July 6, 1993; Washington; State Appellate Court

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Dynasty Development Corporation appeals a trial court's award of attorney fees to Nicholas and Debra Marassi, the respondents, following a dispute stemming from a purchase and sale agreement for a lot in the Windsor Shores housing development. The agreement allowed the successful party in a dispute to recover reasonable attorney fees. The Marassis alleged breach of contract, negligence, fraudulent conveyance, and misrepresentation, citing property damage due to inadequate drainage. They initially sought various forms of relief, including specific performance for improvements and damages for multiple claims, but later dismissed five claims without prejudice. 

At trial, the court ruled in favor of the Marassis on a $15,000 claim for north slope damages and granted specific performance for laying underground utilities, but dismissed other claims, including those for south slope damages and fraudulent conveyance. The Marassis received a net credit of $153 from settled claims and were awarded $12,285 in attorney fees and $118 in costs. Dynasty contends that the Marassis cannot be considered the prevailing party due to the dismissal of the majority of their claims, arguing against the fee award as per the contract terms and relevant Washington state law (RCW 4.84.330). The appellate court reversed the attorney fee award, determining that both parties prevailed on distinct issues and therefore a proportional fee award was warranted.

A prevailing party is defined as one who receives a favorable judgment, as established in Schmidt v. Cornerstone Invs. Inc. An award of attorney fees to a prevailing party is mandatory under RCW 4.84.330. If a contract allows for attorney fees to a successful plaintiff, it also applies to successful defendants. In cases where neither party entirely prevails, the party who substantially prevails, based on the extent of relief granted, is considered the prevailing party. However, if both parties are victorious on major issues, attorney fees may not be awarded. 

The document notes that the general principles do not clarify scenarios where a defendant defends without making a counterclaim. Dynasty argues that a defendant who successfully defends against a plaintiff's contract claims qualifies as a prevailing party, as evidenced by case precedents where unsuccessful plaintiffs did not recover. The court acknowledges that the Marassis received a favorable judgment on only 2 out of 12 claims, raising concerns about the fairness of applying the net affirmative judgment rule. 

The court finds that neither the affirmative judgment rule nor the substantially prevailing standard effectively addresses cases with multiple distinct claims. Instead, a proportionality approach is proposed, allowing each party to recover fees for the claims they win, with awards offset against each other. The Marassis contend that not prevailing on an entire claim does not preclude them from being the prevailing party, referencing Silverdale Hotel Assocs. v. Lomas.

A proportionality approach aligns with the decision in Silverdale Hotel, where the plaintiff obtained approximately $600,000 in damages for breach of contract but could not substantiate other claimed consequential damages. Despite not recovering the full claim, the plaintiff was considered the prevailing party, as the defendant did not succeed in the contract dispute. Silverdale Hotel is distinguished from the current case, as it involved a single breach of contract with multiple damage theories, unlike the multiple distinct breaches asserted by the Marassis. 

The Marassis argue that attorney fees awarded must be reasonable under both the contract and RCW 4.84.330, which protects against disproportionate awards. However, this overlooks the defendant's entitlement to recover fees for successfully defended claims. Awarding fees to successful defendants aligns with the fee-shifting philosophy intended to discourage weak claims and promote settlements. 

It is concluded that defendants should be awarded attorney fees for claims they successfully defend, while plaintiffs receive fees for claims they win, with the amounts offset against each other. The Marassis claim that dismissed claims under CR 15(a) should not affect prevailing party status. Generally, if a plaintiff voluntarily dismisses their action under CR 41, the defendant is considered the prevailing party for attorney fee purposes as established in Walji v. Candyco, Inc. and Andersen v. Gold Seal Vineyards, Inc. 

Although Hubbard v. Scroggin suggests a voluntary dismissal is not a final judgment and may not grant the defendant prevailing party status for attorney fees, this interpretation is rejected. Instead, the principles from Walji and Andersen are upheld, allowing defendants to seek attorney fees for claims dismissed if the trial court permits complaint amendments under CR 15(a). The court may decide on the prevailing party issue during a CR 15 hearing or reserve it for trial.

The trial court has deferred the determination of attorney fees for any future actions related to allegations of defects in the road to the plaintiffs' property. At trial, the Marassis presented seven claims but only prevailed on two, receiving $15,000 for damages and a $6,000 order of specific performance. Consequently, they are entitled to attorney fees for these claims. Conversely, Dynasty prevailed on the five remaining claims and is also entitled to reasonable attorney fees. Both parties seek attorney fees for the appeal, which is permitted under RAP 18.1 if backed by applicable law. The agreement between the parties and RCW 4.84.330 support the award of attorney fees to the prevailing party. Since Dynasty substantially prevailed on appeal, it is entitled to reasonable attorney fees for the appeal expenses. The court's ruling is to reverse and remand for proceedings consistent with this opinion, with concurring judges Webster, C.J., and Baker, J. Additionally, the issue of Dynasty's obligation to install underground utilities has been rendered moot due to compliance with the trial court order. The parties agree on this mootness. Both parties reference a net affirmative judgment to determine the prevailing party, with a citation to Moritzky v. Heberlein, but emphasize that recent interpretations of RCW 4.84.330 indicate that fees should not be awarded when both parties prevail on major issues. RCW 4.84.330 specifies that in actions on contracts made after September 21, 1977, the prevailing party is entitled to reasonable attorney fees as outlined in the contract, with such provisions non-waivable. Previous cases illustrate that attorney fees can still be awarded even when disputes over contract existence arise.

In Stott v. Cervantes, the plaintiff, after suing for misrepresentation, was awarded $3,419, significantly less than the $10,000 sought, with a $327 offset favoring the defendants. Although the plaintiff was deemed the prevailing party and awarded attorney fees on appeal, it was unclear whether the claim was singular or involved multiple contract claims. The defendant's failure to file a respondent's brief meant the issue of proportionality was not addressed. The Marassis contended that under CR 68, Dynasty could have avoided attorney fees by making an offer of judgment; however, since no such offer was made in this case, their argument was deemed unpersuasive. The interplay between CR 68 and RCW 4.84.030 was noted as previously explained in Tippie v. Delisle, but it was not pertinent to the current case.