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explaining a contract providing for payment of attorney fees to a prevailing party could not require payment where "neither party prevailed . . . because was dismissed without prejudice" as "such a dismissal is not a finding on the merits of the claim, a finding necessary before one party can be said to have prevailed."
Summary of this case from The Courier-Journal, Inc. v. Louisville/Jefferson Cnty. Metro Gov'tOpinion
NO. 2011-CA-001299-MR
06-21-2013
DR. SHAMSA HAROON APPELLANT v. MIKE KERWIN AND LAURA KERWIN APPELLEES
BRIEFS FOR APPELLANT: John S. Roberts Lexington, Kentucky BRIEF FOR APPELLEE: John N. Billings Lexington, Kentucky
NOT TO BE PUBLISHED
APPEAL FROM FAYETTE CIRCUIT COURT
HONORABLE THOMAS L. CLARK, JUDGE
ACTION NO. 11-CI-01953
OPINION
AFFIRMING
BEFORE: ACREE, CHIEF JUDGE; CLAYTON AND MAZE, JUDGES. ACREE, CHIEF JUDGE: Dr. Shamsa Haroon appeals from the trial court's May 25, 2011 order dismissing without prejudice the complaint filed by Mike and Laura Kerwin, and the July 1, 2011 order denying Dr. Haroon's request for attorney's fees. On appeal, Dr. Haroon argues that the circuit court should have dismissed the complaint with prejudice, and should have awarded the requested attorney's fees. We disagree and affirm.
I. Facts and Procedure
This matter was dismissed before the parties could undertake any significant discovery. Therefore, the facts are derived from the parties' pleadings and attachments to those pleadings. Although the parties draw different inferences, the basic facts are not in dispute.
On January 19, 2011, Dr. Haroon entered into a real estate purchase contract with Mike Kerwin, agreeing to pay $725,000 for property located in Lexington, Kentucky. The contract contained several contingencies, the most relevant of which dealt with financing and the property's appraised value. On February 10, 2011, PNC Bank forwarded an appraisal showing a value of $728,000; therefore, on the advice of her real estate broker, Dr. Haroon initialed the purchase contract removing the appraisal contingency. On or about February 15, 2011, PNC Bank notified Dr. Haroon's broker that the loan underwriter wanted an updated appraisal because the first appraisal included no information regarding comparable property in the area. The second appraisal came back with a value of $580,000.
Dr. Haroon then attempted to renegotiate the terms of the purchase agreement, offering to purchase the property for $625,000. The Kerwins, through their attorney, advised Dr. Haroon that they intended to enforce the agreement according to its terms and that they would seek damages if Dr. Haroon did not close as required by the agreement. Dr. Haroon did not go forward with the closing and, on April 14, 2011, the Kerwins filed a complaint seeking specific performance, compensatory and punitive damages, and attorney's fees.
On April 20, 2011, counsel for the Kerwins notified Dr. Haroon's attorney that the Kerwins had entered into a purchase agreement for the property with another buyer. The purchase price under the new agreement was more than what Dr. Haroon had initially agreed to pay and called for a closing in mid-June 2011. Based on this new purchase agreement, the Kerwins' counsel stated they would extend the time for Dr. Haroon to answer the complaint and to respond to any discovery until July 1, 2011. Furthermore, the Kerwins' counsel indicated that if the new purchase agreement closed as scheduled, the Kerwins would dismiss their complaint and agree not to pursue any claims they might have against Dr. Haroon.
Notwithstanding the extension offered by the Kerwins, Dr. Haroon, on April 22, 2011, filed an answer to the Kerwins' complaint, a motion to dismiss, and a third-party complaint seeking to join Dr. Haroon's broker to the action. In her motion to dismiss, Dr. Haroon argued that the purchase agreement lacked "mutuality" because: Laura Kerwin owned an interest in the property, but only Mike Kerwin had signed the agreement; while the first appraisal was for more than the purchase price, the second was for substantially less, thus negating Dr. Haroon's removal of that contingency; Dr. Haroon had not been able to obtain financing as set forth in the financing contingency; the Kerwins had not provided a home warranty as required by the agreement; and the agreement called for mediation before proceeding to court.
In their response to Dr. Haroon's motion to dismiss, the Kerwins noted that the motion relied on evidence outside the pleadings and was, in fact, a motion for summary judgment. That being the case, the Kerwins argued that granting summary judgment would be premature because no discovery had taken place. Furthermore, the Kerwins stated they would dismiss their complaint with prejudice if the pending purchase agreement closed in June 2011, and that they had no objection to returning Dr. Haroon's earnest money. In the alternative, the Kerwins argued that any dismissal should be without prejudice until after the pending sale closed. Dr. Haroon then filed a reply and, because her third-party complaint had been returned, a motion for leave to file that complaint. The Kerwins filed a sur-reply regarding Dr. Haroon's motion to dismiss and a motion to dismiss without prejudice.
The circuit court heard arguments on Dr. Haroon's motions to dismiss with prejudice and for leave to file a third-party complaint, and on the Kerwins' motion to dismiss without prejudice. On May 25, 2011, the court entered an order denying Dr. Haroon's motions and granting the Kerwins' motion. Additionally, the court ordered the return of Dr. Haroon's earnest money.
Dr. Haroon filed a timely "Motion to Set Aside Order Entered May 25, 2011 or to Alter or Amend Said Order." Dr. Haroon filed her motion pursuant to Kentucky Rule(s) of Civil Procedure (CR) 56.04. In support, Dr. Haroon reiterated her argument that the agreement lacked mutuality, was defective, and invalid. For these reasons, among others, Dr. Haroon asked the circuit court to enter an order dismissing with prejudice. Dr. Haroon also asked the circuit court to award her attorney's fees. To support that request, Dr. Haroon pointed to a provision in the agreement that called for attorney's fees to be awarded to the prevailing party in any law suit. She also argued that, because the Kerwins had wrongfully filed their complaint, the circuit court should award her attorney's fees as a matter of equity.
The Kerwins filed a response arguing that either CR 59.05 or CR 60.02, not CR 56.04, would be the appropriate avenue for relief. However, even if Dr. Haroon had sought relief under CR 59.05 or 60.02, her motion would fail because she had presented no sufficient reason for the circuit court to alter its May 25, 2011 order. The Kerwins also argued that Dr. Haroon was not entitled to an award of attorney's fees because she had not previously raised that issue and she had not prevailed. Dr. Haroon filed a reply arguing she had sought an award of attorney's fees in her answer and the circuit court's failure to address that subject constituted grounds to seek reconsideration. On July 1, 2011, after hearing arguments from the parties, the circuit court denied Dr. Haroon's motion and her request for attorney's fees. Dr. Haroon then filed this appeal.
II. Standard of Review
Dr. Haroon raises two issues: (1) whether the circuit court erroneously dismissed the Kerwins' complaint without prejudice; and (2) whether the circuit court erroneously failed to award her attorney's fees.
We examine a circuit court's decision to dismiss a claim without prejudice under CR 41.01(2) for an abuse of discretion. Sublett v. Hall, 589 S.W.2d 888, 893 (Ky. 1979). As that review standard implies, the circuit court's discretion is not without limitation. Id. Before entering a dismissal without prejudice under CR 41.01(2), the judge should consider: what preparation the parties have taken toward trial; how much time has lapsed between filing the complaint and the date of the motion; the extent to which a dismissal will prejudice the opposing party; whether the dismissal should contain terms and conditions; and whether any such terms or conditions would prejudice the movant. Id.
Likewise, whether to equitably award attorney's fees is within the sound discretion of the circuit court, and will not be disturbed absent an abuse of that discretion. Giacalone v. Giacalone, 876 S.W.2d 616, 620 (Ky. App. 1994). However, whether a contractual provision mandates an award of attorney's fees is a question of law, which we review de novo. See Bank One, Pikeville, Kentucky v. Commonwealth of Kentucky, Natural Res. and Envtl. Prot. Cabinet, 901 S.W.2d 52, 55 (Ky. App. 1995).
III. Analysis
Before we discuss substantive issues raised, we must first address the Kerwins' continued argument that we should dismiss Dr. Haroon's appeal as untimely filed. On September 22, 2011, the Kerwins filed a motion in this Court seeking dismissal of this appeal as untimely filed, and seeking dismissal of Dr. Haroon's attorney's fees request as untimely raised below. This Court denied the Kerwins' motion to dismiss and advised the parties to argue the timeliness of the attorney's fee issue in their briefs. The Kerwins and Dr. Haroon complied; however, the Kerwins also continue to argue that this appeal should be dismissed as untimely. Therefore, we briefly address that issue.
The Kerwins assert that Dr. Haroon's CR 56.04 motion to set aside did not suspend the running of time for the filing of a notice of appeal. Therefore, the Kerwins argue, Dr. Haroon had to file her appeal within thirty days of the circuit court's May 25, 2011 order dismissing without prejudice. Dr. Haroon's failure to do so, the argument goes, rendered this appeal untimely filed. We disagree.
The Kerwins are correct that, generally, an appeal is timely only if a notice of appeal is filed with the circuit clerk "within 30 days after the date of notation of service of the judgment . . . ." CR 73.02(1)(a). But there are exceptions. "The running of the time for appeal is terminated by a timely motion pursuant to . . . Rules 50.02, 52.02 or 59 . . . ." CR 73.02(1)(e). The Kerwins are also correct that Dr. Haroon cited CR 56.04 as the basis of the motion, and this rule is not one listed in CR 73.02(1)(e).
However, we must also consider other factors. The caption of the motion indicates the relief sought was to alter or amend the judgment, and the body of the motion referred to reconsideration of the May 25, 2011 order, thereby implicating CR 52.02 and CR 59. Furthermore, the circuit court did not treat the motion as one brought under CR 56.04, but rather as one brought under rules that do suspend the time for filing a notice of appeal.
As noted by the Supreme Court of Kentucky in Smith v. Isaacs, 777 S.W.2d 912 (Ky. 1989), "[w]e no longer approach pleadings searching for a flaw, a technicality upon which to strike down a claim or defense," rather, we look to "the substance of the pleading." Id. at 915. We believe Dr. Haroon's motion, under the facts of this case, satisfied the requirements of CR 73.02(1)(e) for suspending the time for filing a notice of appeal.
We next address whether the circuit court erroneously dismissed the Kerwins' complaint without prejudice. CR 41 provides that, after an answer or motion for summary judgment has been filed, a plaintiff can only voluntarily dismiss an action by agreement of the opposing party or by order of the court. In either case, a dismissal, unless otherwise specified, is without prejudice. In its May 25, 2011 order, the circuit court specifically stated that "Plaintiff's Motion to Dismiss without prejudice is GRANTED." Therefore, Dr. Haroon's arguments to the contrary notwithstanding, there is no question that the circuit court dismissed this matter without prejudice.
To determine whether that dismissal was erroneous, we look to the factors set out in Sublett, 589 S.W.2d at 893. The Kerwins had forwarded written discovery to Dr. Haroon, but they indicated she did not need to respond until July 1, 2011, which was more than two months after the circuit court dismissed their complaint. Furthermore, the complaint was filed on April 14, 2011, and the circuit court granted the Kerwins' motion to dismiss without prejudice on May 25, 2011. Therefore, the parties had essentially taken no steps toward trial and, in terms of litigation, little time had passed.
The Kerwins indicated they would not pursue any claims against Dr. Haroon if they were able to close on the second purchase agreement, thus limiting, if not eliminating, any prejudice Dr. Haroon might suffer in terms of damages. We note that, as argued by Dr. Haroon, a dismissal without prejudice left open the possibility that the Kerwins could file another complaint, thus leaving her in legal limbo. However, absent some condition to the contrary, that is virtually uniformly the circumstance when a case is dismissed without prejudice. Furthermore, the defendants in Sublett made that argument and the Supreme Court found no substantial injustice or prejudice in the trial court's dismissal. See Sublett, 589 S.W.2d at 893. We recognize that Dr. Haroon's attorney's fee claim, if viable, was prejudiced, at least arguably. However, in Sublett, the defendants were seeking attorney's fees and, in a case that had been in litigation for several years, the Supreme Court found no substantial injustice or prejudice would result from the dismissal. Id.
Finally, the circuit court here placed no terms or conditions on the dismissal that would prejudice Dr. Haroon. In fact, the order required the return of Dr. Haroon's earnest money, a condition that benefitted her. Based on these circumstances, we cannot say that the circuit court abused its discretion in granting the Kerwins' motion to dismiss without prejudice.
Turning to the issue of attorney's fees, we first address Dr. Haroon's equitable argument. According to Dr. Haroon, she should be entitled to an award of attorney's fees because the Kerwins brought their complaint with no basis. We disagree. Dr. Haroon signed the purchase agreement, attempted to alter the terms, and then refused to close. We recognize that she believes she had justification for doing so; however, the Kerwins' argument that Dr. Haroon's failure to comply with the agreement is not without foundation. Therefore, we discern no abuse in the circuit court's decision to deny Dr. Haroon's request for attorney's fees on equitable grounds.
Furthermore, we discern no error in the circuit court's denial of Dr. Haroon's request for attorney's fees on contractual grounds. The parties agree that the contract provides for the payment of attorney's fees to the prevailing party in a dispute. However, neither party prevailed in this case because it was dismissed without prejudice. By its nature, such a dismissal is not a finding on the merits of the claim, a finding necessary before one party can be said to have prevailed. Because neither party prevailed, the circuit court correctly denied Dr. Haroon's contractual claim to attorney's fees.
CONCLUSION
For the foregoing reasons, we affirm the circuit court's dismissal of the Kerwins' action without prejudice, and its denial of Dr. Haroon's request for attorney's fees.
ALL CONCUR. BRIEFS FOR APPELLANT: John S. Roberts
Lexington, Kentucky
BRIEF FOR APPELLEE: John N. Billings
Lexington, Kentucky