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Cole v. Bartels (7/7/2000) sp-5296
Cole v. Bartels (7/7/2000) sp-5296
Notice: This opinion is subject to correction before publication in
the Pacific Reporter. Readers are requested to bring errors to the attention of
the Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone
(907) 264-0608, fax (907) 264-0878.
THE SUPREME COURT OF THE STATE OF ALASKA
CONSTANCE L. COLE, a/k/a )
CONNIE COLE, ) Supreme Court No. S-9050
)
Appellant, ) Superior Court No.
) 4FA-97-635 CI
v. )
) O P I N I O N
THOMAS S. BARTELS, JANET )
BARTELS, and CHARLES ) [No. 5296 - July 7, 2000]
BOURQUE, )
)
Appellees. )
______________________________)
Appeal from the Superior Court of the State of
Alaska, Fourth Judicial District, Fairbanks,
Niesje J. Steinkruger, Judge.
Appearances: Christian Bataille and Charles E.
Cole, Fairbanks, for Appellant. Christopher E. Zimmerman,
McConahy, Zimmerman & Wallace, Fairbanks, for Appellees Thomas and
Janet Bartels. Robert B. Groseclose, Cook, Schuhmann & Groseclose,
Fairbanks, for Appellee Charles Bourque.
Before: Matthews, Chief Justice, Eastaugh,
Fabe, Bryner, and Carpeneti, Justices.
FABE, Justice.
I. INTRODUCTION
Constance Cole sold Thomas and Janet Bartels a home with
decayed walls. The Bartelses sued Cole, claiming that she
willfully failed to disclose the defect. Cole filed a third-party
claim against carpenter Charles Bourque, alleging that he had
failed to fully disclose the "wall rot" to Cole. Bourque cross-
claimed on the basis that Cole never paid him for his services. A
jury found against Cole on all claims and awarded Bourque and the
Bartelses compensatory and punitive damages. The superior court
awarded prejudgment interest on the compensatory award and enhanced
attorney's fees to seventy-five percent of actual fees. Cole
appeals the awards of prejudgment interest and enhanced fees. We
affirm.
II. FACTS AND PROCEEDINGS
In 1992 State Farm Fire and Casualty Company inspected
Constance Cole's Fairbanks home and found that certain repairs were
necessary for Cole to retain coverage. In addition to problems
with the roof and gutters, State Farm noted that the walls near the
home's sunroom contained rot.
Charles Bourque was hired to perform repair work on
Cole's house. While repairing the exterior of the sunroom walls,
Bourque discovered that the plywood and framing members beneath the
siding were "rotten." Although Bourque notified Cole and showed
her the rot, Cole instructed him to replace the external plywood
and siding without investigating or repairing the internal decay.
Cole received a bill from Bourque reflecting this activity: "Remove
siding & plywood on room in back of garage. Totally rotten. Did
not repair. Just replaced plywood & cedar."
Dissatisfied with Bourque's assessment, Cole sought a
second opinion from carpenter Roger Burks. Cole did not inform
Burks that Bourque had found the sunroom walls to be decayed and
had only superficially repaired them. Burks determined that the
sunroom walls had water damage but did not believe that they posed
any structural concerns. Burks completed needed repairs to the
roof and gutters.
Although Cole paid Burks, Cole never paid Bourque. After
Bourque submitted an invoice to State Farm for payment, State Farm
issued a check in the amount of $1,429 made payable to both Cole
and Quality Carpentry, Bourque's business. Cole cashed the check,
signing Quality Carpentry's name to the check without Bourque's
knowledge or permission.
In 1994 Cole sold the house to her neighbors, Thomas and
Janet Bartels. The Residential Real Property Disclosure Statement
completed by Cole did not acknowledge any defects to the interior
or exterior walls. The Bartelses learned of the rotting sunroom
walls only when Bourque informed them of the problem at a yard sale
in 1995.
In 1997 the Bartelses sued Cole for her failure to
disclose the wall decay in violation of AS 34.70.090(c). In
response, Cole denied that Bourque had informed her about the decay
and joined Bourque and State Farm as third-party defendants. State
Farm settled prior to trial. Bourque filed a counterclaim against
Cole for failing to pay him and for forging his business's name on
the check from State Farm.
After a trial, the jury found in favor of the Bartelses
and Bourque on all claims. The jury found that Cole willfully
failed to disclose the decay in the sunroom walls and awarded the
Bartelses $17,500 in compensatory damages and $15,000 in punitive
damages. The jury awarded Bourque $1,829 in compensatory damages
and $2,500 in punitive damages on his counterclaim.
The superior court awarded enhanced attorney's fees under
Civil Rule 82(b)(3) and prejudgment interest to both the Bartelses
and Bourque. The court awarded Bourque seventy-five percent, or
$22,221.00, of his attorney's fees and prejudgment interest of
$1,162.90. The court also awarded the Bartelses seventy-five
percent, or $19,063.13, of their attorney's fees, and prejudgment
interest in the amount of $7,712.47.
Cole appeals only the superior court's awards of
prejudgment interest to the Bartelses and enhanced attorney's fees
to the Bartelses and Bourque.
III. DISCUSSION
A. Standard of Review
We review a trial court's decision to award enhanced fees
under the abuse of discretion standard. [Fn. 1] The determination
of whether the prevailing party is entitled to prejudgment interest
is a question of law subject to this court's independent judgment.
[Fn. 2] "An award of prejudgment interest should be denied only to
avoid an injustice," such as a double recovery. [Fn. 3]
B. The Superior Court Properly Awarded the Bartelses
Prejudgment Interest.
The superior court awarded the Bartelses $7,712.47 in
prejudgment interest on the compensatory damages. Cole appeals
this award of prejudgment interest on the basis that, because the
Bartelses had not yet repaired the sunroom at the time of trial,
the award of prejudgment interest on the unexpended repair costs
constitutes an improper double recovery.
Prejudgment interest will be denied when such an award
constitutes a double recovery. [Fn. 4] The party opposing a
prejudgment interest award bears the burden to show that a double
recovery would result; otherwise prejudgment interest is awarded as
a matter of course. [Fn. 5] Thus, Cole has the burden to show that
the award of prejudgment interest to the Bartelses resulted in a
double recovery.
In Sebring v. Colver, [Fn. 6] we reversed an award of
prejudgment interest on the cost of future repairs. The Colvers
alleged a breach of warranty under a contract for the construction
of a family residence. [Fn. 7] The jury awarded the Colvers
damages both for money already expended on repairs and for the
costs of repairs not yet performed. [Fn. 8] The trial court
awarded prejudgment interest on the entire sum. [Fn. 9] We
affirmed the award of prejudgment interest on the amount already
expended by the Colvers but reversed the portion of the award
compensating the Colvers for the costs of future repairs:
[W]e conclude that the probable basis for the
jury award was the estimated cost of repairs at the time of trial.
Since the financial impact of the passage of time was thus
incorporated into the jury's damage award, any award of prejudgment
interest on this amount would therefore constitute a double
recovery.[ [Fn. 10]]
In contrast, we held in State Farm Fire and Casualty
Company v. Nicholson [Fn. 11] that no double recovery would result
from an award of prejudgment interest on damages awarded for house
repairs to be performed after trial. There the plaintiffs sued
their insurer for the tort of bad faith handling of their first-
party insurance claim. [Fn. 12] The jury awarded $105,700 in
compensatory damages, apparently relying on estimates of the costs
of repairing damage to the house caused by a broken water main.
[Fn. 13] The trial court awarded prejudgment interest on the
compensatory damage award. [Fn. 14] On appeal, we concluded that
there was no danger of double recovery and affirmed the prejudgment
interest award. [Fn. 15]
Cole argues that Sebring, rather than Nicholson, should
control. But we indicated in Nicholson that prejudgment interest
is precluded only when the award "would constitute a double
recovery," not merely "when repair estimates are current at the
time of trial." [Fn. 16] This danger of double recovery arises
when repair costs increase between the time of the injury and the
time of trial. An award of prejudgment interest in such situations
would not serve the purpose of prejudgment interest -- to
compensate the plaintiff for the use of money rightfully belonging
to the plaintiff between the time of injury and the trial [Fn. 17]
-- because the passage of time is already reflected in the higher
repair costs. [Fn. 18] And it is the defendant's burden to
demonstrate that the repair costs have increased since the date of
the injury.
Here, the Bartelses suffered the loss -- and their cause
of action accrued -- at the time Cole sold them the house without
disclosing the defect. Cole had use of the repair money that
rightfully belonged to the Bartelses from the date of the sale.
Cole has offered no evidence demonstrating that the costs of
repairing the sunroom walls have increased since the date of the
sale. Absent such a showing of double recovery, we will not
reverse the superior court's award of prejudgment interest.
C. The Superior Court Did Not Err in Awarding Enhanced
Attorney's Fees to the Bartelses and Bourque.
The superior court awarded the Bartelses and Bourque
enhanced attorney's fees under Civil Rule 82(b)(3). [Fn. 19] The
superior court enhanced both fee awards to seventy-five percent.
Cole argues that the Rule 82(b)(3) factors cited by the superior
court do not support an enhanced award. Cole further argues that
the seventy-five percent enhancement is improper in the absence of
bad faith or vexatious conduct.
1. Complexity
Cole challenges the superior court's determination that
enhanced fees were warranted because Cole's claims increased the
complexity of the case. [Fn. 20] In particular, the superior court
found that Cole heightened the complexity by bringing in State Farm
and Bourque as third-party defendants on claims that lacked factual
support: "The litigation actions of Ms. Cole increased the
attorney's fees to the Bartels by involving other defendants on
theories that were not adequately investigated or believable in
order to blame others for her conscious decision not to disclose
the defect in the house to the Bartels[es]."
These conclusions are not erroneous. Cole's third-party
claim against Bourque substantially increased the amount of
pleading and motion practice. The Bartelses were forced to monitor
actively the substantial body of pleadings generated by these
third-party claims and to adjust litigation strategies accordingly.
Therefore, the superior court did not abuse its discretion in this
regard.
2. Reasonableness
As a further basis for awarding enhanced attorney's fees,
the superior court determined that Cole's claims and defenses were
not reasonable. [Fn. 21] In particular, the superior court noted
the inconsistent positions taken by Cole: "On the one hand she
claimed [Bourque] owed her a duty to disclose the rot he discovered
when working for her and on the other hand she claimed she did not
pay him because she did not rely on what he told her."
The record supports these findings. Cole at first denied
that Bourque had informed her of the decay. But she later claimed
that she was aware of the decay but thought it was only minor or
cosmetic in nature and did not pose any structural problems. But
this belief did not relieve her of her duty to disclose.
Sellers of residential real property must make good faith
efforts to disclose defects. [Fn. 22] Cole failed to indicate any
defects -- major or minor -- with respect to the sunroom. The
disclosure form does not indicate that only major defects need to
be disclosed: "The transferor is required to disclose defects or
other conditions in the residential real property . . . of which
the transferor has been notified or has personal knowledge as of
the date this disclosure statement is signed."
Because Cole was required by statute to disclose even
minor defects of which she had been notified, we conclude that the
superior court did not abuse its discretion by enhancing the fee
awards based on the unreasonableness of Cole's claims and defenses.
[Fn. 23]
3. Seventy-five percent enhancement
The superior court enhanced the attorney's fee awards to
Bourque and the Bartelses to seventy-five percent of actual fees
incurred. In its order, the superior court did not explicitly find
that Cole's conduct during the litigation was vexatious or in bad
faith. [Fn. 24] Cole claims that this enhancement constitutes an
award of substantially full attorney's fees and is not justified in
the absence of bad faith or vexatious conduct.
Cole relies primarily on Marathon Oil Co. v. ARCO Alaska,
Inc. [Fn. 25] In that case, the trial court awarded eighty percent
of attorney's fees under Rule 82(b)(3) based on the "fundamental
unreasonableness of Marathon's position." [Fn. 26] Because we
disagreed with this assessment and concluded that Marathon had
"raised a legitimate issue," we reversed the award. [Fn. 27] We
also reiterated the rule that "an award of substantially 'full
attorney's fees is manifestly unreasonable in the absence of bad
faith or vexatious conduct by the non-prevailing party.'" [Fn. 28]
Under this rule we have required vexatious or bad faith conduct to
warrant ninety percent [Fn. 29] or full [Fn. 30] attorney's fees
awards.
Here, ample evidence supports the trial court's
determination that Cole's position was unreasonable. Moreover, a
seventy-five percent fee award does not constitute a "substantially
full award" and thus does not require vexatious or bad faith
conduct.
For these reasons, we affirm the superior court's
seventy-five percent enhanced fee awards to Bourque and the
Bartelses.
IV. CONCLUSION
In summary, we AFFIRM the superior court's judgment in
its entirety.
FOOTNOTES
Footnote 1:
See Marathon Oil Co. v. ARCO Alaska, Inc., 972 P.2d 595, 600
(Alaska 1999).
Footnote 2:
See Navistar Int'l Transp. Corp. v. Pleasant, 887 P.2d 951,
958 n.10 (Alaska 1994).
Footnote 3:
Tookalook Sales & Serv. v. McGahan, 846 P.2d 127, 129 (Alaska
1993).
Footnote 4:
See State Farm Fire & Cas. Co. v. Nicholson, 777 P.2d 1152,
1158 (Alaska 1989).
Footnote 5:
See Hancock v. Northcutt, 808 P.2d 251, 261 (Alaska 1991).
Footnote 6:
649 P.2d 932 (Alaska 1982).
Footnote 7:
See id. at 933.
Footnote 8:
See id. at 936.
Footnote 9:
See id.
Footnote 10:
Id. (footnotes omitted).
Footnote 11:
777 P.2d 1152 (Alaska 1989).
Footnote 12:
See id. at 1154.
Footnote 13:
See id. at 1153, 1158.
Footnote 14:
See id. at 1158.
Footnote 15:
See id.
Footnote 16:
Id.
Footnote 17:
See McConkey v. Hart, 930 P.2d 402, 405 (Alaska 1996).
Footnote 18:
See Sebring, 649 P.2d at 936. We note that in Sebring,
heightened repair costs reflected the high inflation prevalent
during that time period.
Footnote 19:
Civil Rule 82(b)(3) states as follows:
The court may vary an attorney's fee award
calculated under subparagraph (b)(1) or (2) of this rule if, upon
consideration of the factors listed below, the court determines a
variation is warranted:
(A) the complexity of the litigation;
(B) the length of trial;
(C) the reasonableness of the attorneys'
hourly rates and the number of hours expended;
(D) the reasonableness of the number of
attorneys used;
(E) the attorneys' efforts to minimize fees;
(F) the reasonableness of the claims and
defenses pursued by each side;
(G) vexatious or bad faith conduct;
(H) the relationship between the amount of
work performed and the significance of the matters at stake;
(I) the extent to which a given fee award may
be so onerous to the non-prevailing party that it would deter
similarly situated litigants from the voluntary use of the courts;
(J) the extent to which the fees incurred by
the prevailing party suggest that they had been influenced by
considerations apart from the case at bar, such as a desire to
discourage claims by others against the prevailing party or its
insurer; and
(K) other equitable factors deemed relevant.
If the court varies an award, the court shall
explain the reasons for the variation.
Footnote 20:
See Rule 82(b)(3)(A). We note that complexity serves poorly
as an independent enhancing factor where hourly fees, rather than
a portion of a money judgment, serve as the subject of the award.
In general, total fees calculated on an hourly basis will already
reflect the complexity of a case. Thus, using complexity as an
enhancing factor in the hourly fee context double-counts the effect
of complexity on fees. "But this points to a weakness in the rule,
not to trial court error." Tenala, Ltd. v. Fowler, 993 P.2d 447,
451 n.19 (Alaska 1999).
Footnote 21:
See Rule 82(b)(3)(F).
Footnote 22:
See AS 34.70.010, .060, .090.
Footnote 23:
Cole also challenges this determination on the grounds that
the legislature did not provide for an enhanced fee award under AS
34.70.090(d). This argument lacks merit because AS 34.70.090(d)
permits "attorney fees to the extent allowed under the rules of
court," including Rule 82(b)(3). Cole's claims that Bourque's
attorney's fees are excessive and that Bourque was improperly
awarded fees under both Rule 82(b)(1) and 82(b)(2) are likewise
without merit.
Footnote 24:
As Cole correctly points out, the Bartelses' argument
regarding bad faith misses the point. The Bartelses argue that
Cole's bad faith conduct with respect to the disclosure of the rot
justifies the enhanced fees. However, the bad faith conduct
warranting an enhanced fee award under Rule 82(b)(3)(G) occurs
during the litigation, not during the underlying transaction that
is the subject of the litigation. See, e.g., Reid v. Williams, 964
P.2d 453, 463 (Alaska 1998) ("Rule 82 . . . provides protection
for the winning litigant who is forced to respond to an opponent's
. . . bad faith litigation tactics.").
Footnote 25:
972 P.2d 595 (Alaska 1999).
Footnote 26:
Id. at 605.
Footnote 27:
Id.
Footnote 28:
Id. (quoting Alaska R. Civ. P. 82, note to Supreme Court Order
1118am).
Footnote 29:
See State v. University of Alaska, 624 P.2d 807, 818 (Alaska
1981).
Footnote 30:
See, e.g., Demoski v. New, 737 P.2d 780, 788 (Alaska 1987);
Malvo v. J.C. Penney Co., 512 P.2d 575, 588 (Alaska 1973).
