Kathryn Learner Family Trust v. James D. Wilson

• Court: Court of Appeals of Washington
• Decided: September 4, 2014
• Docket: 31581-9
• Status: Published

Opinion

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

No. 31581-9-III Kathryn Learner Family Trust v. Wilson

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

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

No. 31581·9·111 Kathryn Learner Family Trust v. Wilson

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

No. 31581-9-111 Kathryn Learner Family Trust v. Wilson

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.

No.31581-9-III Kathryn Learner Family Trust v. Wilson

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

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

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

No.315S1-9-III Kathryn Learner Family Trust v. Wilson

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:

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