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Hawaiian Trust Co. v. Northwest Shoppers Outlet Inc.

January 13, 1997

HAWAIIAN TRUST COMPANY, LTD., AS TRUSTEE FOR THE EDWIN TU-KUEI KAM TRUST, RESPONDENT,
v.
NORTHWEST SHOPPERS OUTLET, INC., A WASHINGTON CORPORATION, DANIEL J. MURPHY AND JANE DOE MURPHY, AND THE MARITAL COMMUNITY THEREOF, APPELLANTS,



Appeal from Superior Court of King County. Docket No: 93-2-19853-1. Date filed: 06/27/95.

Authored by Ann L. Ellington. Concurring: Walter E. Webster, Mary K. Becker.

The opinion of the court was delivered by: Ellington

ELLINGTON, J. -- Daniel Murphy, president of Northwest Shoppers Outlet, Incorporated, guaranteed Northwest Shoppers' lease of commercial property from Hawaiian Trust Company. Hawaiian Trust sued Northwest Shoppers and Murphy for breach of the lease and the guaranty. A jury found that Northwest Shoppers had not breached the lease and that Murphy had not breached the guaranty, but found Northwest Shoppers liable to Hawaiian Trust for $9,000 in damages under a quasi-contract/restitution theory. The trial court awarded Murphy $2,500 in attorney fees as prevailing party under the lease, but Murphy claims the court should have awarded the entire $12,345.31 he had requested. He also argues the trial court abused its discretion when it offset his attorney fees award by the amount of Hawaiian Trust's judgment against Northwest Shoppers.

From the scant record before this court, it is impossible to determine whether the trial court considered the proper factors when it awarded Murphy $2,500. We, therefore, remand for determination of fees. However, the trial court did not abuse its discretion when it offset Murphy's fee award by Hawaiian Trust's judgment against Northwest Shoppers because it would have been inequitable to require Hawaiian Trust to pay Murphy's attorney fees when he was Northwest Shoppers' sole shareholder, and was responsible for Hawaiian Trust having expended the funds for tenant improvements for which Northwest Shoppers was ultimately held liable.

FACTS

In May 1993, Daniel Murphy, Northwest Shoppers' president and sole shareholder, guaranteed the company's lease of commercial space from Hawaiian Trust. The lease was to be void if Northwest Shoppers did not obtain a Mukilteo business license by June 1, 1993, which Northwest Shoppers failed to do. Nevertheless, Hawaiian Trust continued to make tenant improvements after June 1 at Murphy's request. In August 1993, Hawaiian Trust sued Northwest Shoppers because it failed to fulfill other obligations under the lease, including taking possession of the property. Hawaiian Trust asked for over $40,000 in damages calculated by accelerating the rent under the lease.

A jury found that Northwest Shoppers had not breached the lease, and that Murphy had not breached the guaranty, but that Northwest Shoppers was liable to Hawaiian Trust for $9,000 under a quasi-contract/restitution theory. The court then subtracted Northwest Shoppers' $6,435 security deposit from Hawaiian Trust's judgment, giving Hawaiian Trust a net judgment of $2,565.

Murphy, as prevailing party under the lease, asked for $12,345.31 in attorney fees, claiming that "the time rate is reasonable; the hours incurred are reasonable; the total fee requested is reasonable." But the trial court awarded Murphy fees of only $2,500 and offset Murphy's fee award by the amount of Hawaiian Trust's judgment against Northwest Shoppers, "so neither party [was] entitled to a final monetary judgment in its favor." This appeal followed.

ATTORNEY FEES

Murphy first claims the trial court abused its discretion when it awarded him only $2,500, rather than the $12,345.31 he requested. The higher figure was calculated by multiplying the total hours Murphy's lawyer, Gary Krohn, spent on the case, multiplied by Krohn's hourly rate. Hawaiian Trust argues that $2,500 was reasonable because Krohn represented both Murphy and Northwest Shoppers, and Krohn spent most of his time at trial defending Northwest Shoppers from the breach of lease claim. Murphy responds that defending the corporation from the breach of lease claim was integral to his defense on the breach of guaranty claim, so he was entitled to an award covering all the time Krohn spent. Because we cannot determine how the trial court arrived at the figure awarded, we vacate the award and remand.

When a lease specifically provides that attorney fees incurred to enforce the lease shall be awarded to one of the parties, the prevailing party is entitled to reasonable attorney fees, whether or not he is a party specified in the lease. "'Prevailing party' means the party in whose favor final judgment is rendered." RCW 4.84.330. The award of fees to the prevailing party is mandatory under the statute, but the amount awarded is discretionary. Kofmehl v. Steelman, 80 Wash. App. 279, 286, 908 P.2d 391 (1996). The trial court's discretion to fix the amount of an attorney fees award is broad *fn1 and may be overturned only for an abuse of discretion. American Nursery Products, Inc. v. Indian Wells Orchards, 115 Wash. 2d 217, 234, 797 P.2d 477 (1990). The court abuses its discretion only if its exercise is manifestly unreasonable or based upon untenable grounds or reasons. Progressive Animal Welfare Society v. University of Washington, 114 Wash. 2d 677, 689, 790 P.2d 604 (1990).

To determine the reasonableness of attorney fees, the trial court should first multiply the lawyer's reasonable hourly rate by the total number of hours reasonably spent. That figure should then be adjusted up or down considering, among other things, the difficulty of the questions involved, the lawyer's skill and experience, and the monetary value of the controversy. American Nursery, 115 Wash. 2d at 234; Herring v. Dept. of Social and Health Services, 81 Wash. App. 1, 34-35, 914 P.2d 67 (1996). The lawyer requesting the fees has the burden to prove their reasonableness. Herring, 81 Wash. App. at 34.

Here, Murphy prevailed on his defense that he did not breach his guaranty and thus was entitled to fees under the lease. The parties did not order a report of proceedings, but agreed at oral argument that the Judge did not articulate any rationale for setting fees at $2,500. Because we do not know whether the court considered such things as the time devoted to each claim and the difficulty of the questions presented, it is impossible to assess whether the court abused its discretion. See Progressive Animal Welfare Society v. University of Washington, 54 Wash. App. 180, 186, 773 P.2d 114, (1989), remanded on other grounds, 114 Wash. 2d 677, 689, 790 P.2d 604 (1990) (trial court should provide sufficient information regarding its fee ...


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