Henderson v. Henderson Investment Properties, L.L.C.

227 P.3d 568, 148 Idaho 638, 2010 Ida. LEXIS 33
CourtIdaho Supreme Court
DecidedFebruary 19, 2010
Docket35138
StatusPublished
Cited by11 cases

This text of 227 P.3d 568 (Henderson v. Henderson Investment Properties, L.L.C.) is published on Counsel Stack Legal Research, covering Idaho Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Henderson v. Henderson Investment Properties, L.L.C., 227 P.3d 568, 148 Idaho 638, 2010 Ida. LEXIS 33 (Idaho 2010).

Opinions

W. JONES, Justice.

FACTUAL AND PROCEDURAL BACKGROUND

Appellant, Ralph Henderson (Ralph), his deceased wife, Lena Henderson (Lena), along with Respondents, their son, Roger Henderson (Roger), and daughter-in-law, Lisa Henderson (Lisa), created a business known as Henderson Investment Properties, L.L.C. (HIP). The sole purpose of HIP was to operate a Jimmie John’s Gourmet Sandwich Shop in Pocatello, Idaho. When forming HIP, all four parties signed an Operating Agreement, which stipulated that Roger and Lisa were to manage HIP. Lena died on August 28, 2001, and in January of 2002, an amendment was made to the Operating Agreement, whereby Ralph obtained Lena’s membership interest in HIP.

On July 27, 2005, Ralph filed a Complaint for Judicial Dissolution pursuant to I.C. § 53-643(1)(a). In his complaint, Ralph asserted that the two requisite elements to obtain judicial dissolution had been satisfied; the members were deadlocked in their management of HIP, and as a result of the deadlock, irreparable injury was or would be suffered by HIP. Ralph also sought judicial dissolution pursuant to I.C. § 53-643(1)(b). Ralph again claimed that the two necessary elements had been satisfied because Roger and Lisa had committed illegal, oppressive, or fraudulent acts, and consequently, irreparable injury had occurred or would occur to HIP.

On April 10, 2007, Ralph filed a complaint wherein he sought a declaratory judgment under I.C. § 53-641(1)(e). Ralph asserted that since more than 120 days had elapsed from the filing of the Complaint for Judicial Dissolution, pursuant to § 53-641(1)(e), Roger and Lisa were dissociated from HIP. Subsequently, on May 21, 2007, the district court consolidated the above actions. The trial began on July 6, 2007, and finished on July 8, 2007.

Shortly thereafter, on August 2, 2007, the district court issued its Memorandum Decision, Findings of Fact and Conclusions of Law. In its decision, the district court denied Ralph’s request for judicial dissolution. The court held that under I.C. § 53-643(1)(a), there had been a deadlock in the management of HIP, but that HIP had not suffered irreparable injury, nor was it likely to occur. In addition, the district court held that under I.C. § 53-643(1)(b), there had been no illegal, oppressive, or fraudulent acts on the part of Roger and Lisa. As a result of its ruling, on November 7, 2007, the district court dismissed Ralph’s claim for declaratory relief.

On February 12, 2008, the district court released its Memorandum Decision and Order on Motion for Fees and Costs. The Court ruled that Roger and Lisa were not entitled to attorney fees under I.C. §§ 12-120 or 12-121; however, the district court granted attorney fees and expenses under Article XIV(G) of the Operating Agreement. The court awarded attorney fees to Roger and Lisa for Ralph’s dissolution action under I.C. §§ 53-643(1)(a) and (b), and Ralph’s declaratory judgment action under I.C. § 53-641(1)(e). The Court awarded a total of $21,552.00. Following the award of fees, on March 21, 2008, Ralph filed an appeal.

ISSUES ON APPEAL

I. Whether the district court abused its discretion when awarding attorney fees under Article XIV(G) of the Operating Agreement.
II. Whether attorney fees should be granted on appeal under Article XIV(G) of the Operating Agreement.

STANDARD OF REVIEW

When reviewing a trial court’s award of attorney fees, this Court applies an abuse of discretion standard. U.S. Bank Nat’l Ass’n v. Kuenzli, 134 Idaho 222, 228, 999 P.2d 877, 883 (2000) (citing Brinkman v. Aid Ins. Co., 115 Idaho 346, 350-51, 766 P.2d 1227, 1231-32 (1988)). “To determine whether there is an abuse of discretion this Court considers whether (1) the court correctly perceived the issue as one of discretion; (2) the court acted within the boundaries of such [640]*640discretion and consistently with legal standards applicable to specific choices; and (3) the court reached its decision by an exercise of reason.” Lee v. Nickerson, 146 Idaho 5, 9, 189 P.3d 467, 471 (2008).

ANALYSIS

I. The district court abused its discretion in awarding attorney fees under Article XIY(G) of the Operating Agreement.

The district court concluded that Roger and Lisa were not entitled to an award of attorney fees pursuant to either I.C. § 12-120(3) or I.C. § 12-121. Rather, relying on Idaho R. Civ. P. 54(e)(1), the district court concluded that Roger and Lisa, as prevailing parties, were entitled to attorney fees under the terms of the Operating Agreement. This Court finds the award to be in error.

A. The district court abused its discretion in awarding attorney fees for Ralph’s judicial dissolution claim under I.C. §§ 53 — 643(l)(a) and (b).

The district court first awarded attorney fees to Roger and Lisa for their successful defense of Ralph’s dissolution action under I.C. §§ 53-643(1)(a) and (b). In awarding attorney fees under Article XIV(G), the district court provided two justifications: first, Ralph “sought to enforce a variety of Operating Agreement provisions;” and second, “But for the contract in the form of the Operating Agreement, there would have been no reason nor opportunity for Ralph to bring a lawsuit against the [sic] Roger and Lisa....”

Ralph claims that Article XIV(G) of the Operating Agreement has not been satisfied because had the district court granted the requested relief, the Operating Agreement would govern a company that is no longer in existence. In addition, Ralph claims that evidence of Operating Agreement violations was offered to establish “irreparable injury,” a required showing to obtain judicial dissolution under I.C. §§ 53 — 643(1)(a) and (b). The Operating Agreement stipulates that “irreparable injury” occurs when a provision of the Agreement is violated. Ralph argues, thus, the Agreement violations were presented simply to establish an element of a statutory judicial dissolution action.

Roger and Lisa reiterate the district court’s arguments and assert that the award of attorney fees was proper because Ralph’s allegation of Operating Agreement violations amounted to an attempt to enforce provisions of the Agreement. Ralph and Lisa also repeat the district court’s reasoning, that even if there is a distinction between a contract right and a statutory right, the statutory right would not exist but for the contract between the parties.

This Court finds that the district court abused its discretion in awarding attorney fees. The court properly recognized the discretionary nature of its decision. The district court also exercised reason; the court reasoned that Ralph alleged Operating Agreement violations as a basis for judicial dissolution, and that the allegations amounted to an attempt to enforce the Operating Agreement. The district court also reasoned that Article XIV(G) was implemented by the fact that “but for” the Operating Agreement there would not have been a lawsuit. The district court, however, did not satisfy the second prong of the test; the district court did not act consistently with Article XIV(G) of the Operating Agreement, the legal standard at issue. See Lee, 146 Idaho at 9, 189 P.3d at 471.

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Henderson v. Henderson Investment Properties, L.L.C.
227 P.3d 568 (Idaho Supreme Court, 2010)

Cite This Page — Counsel Stack

Bluebook (online)
227 P.3d 568, 148 Idaho 638, 2010 Ida. LEXIS 33, Counsel Stack Legal Research, https://law.counselstack.com/opinion/henderson-v-henderson-investment-properties-llc-idaho-2010.