Opinion
No. 61768-1-I.
April 6, 2009.
Appeal from a judgment of the Superior Court for Snohomish County, No. 06-2-08507-6, Richard J. Thorpe, J., entered May 22, 2008.
Affirmed by unpublished opinion per Agid, J., concurred in by Schindler, C.J., and Becker, J.
Pacific Continental Shippers (PACCON) obtained a default judgment against Baking Systems, Inc. (BSI) for payment of shipping services and was also awarded attorney fees. The trial court denied BSI's motion to vacate the default judgment and awarded additional fees and costs to PACCON for defending the motion and for efforts to collect on the default judgment. We affirmed the denial of the motion to vacate, but remanded for the trial court to enter findings and conclusions in support of the fee award and to determine the amount of fees PACCON incurred on appeal. BSI challenges the fee award ordered on remand, contending that (1) the trial court's award exceeded the scope of remand, (2) PACCON's motion for additional postjudgment fees was untimely, (3) the default judgment limited recovery of attorney fees, (4) the fee award amount was unreasonable, (5) PACCON was not entitled to fees in the first appeal on the attorney fees issue, and (6) the trial court denied BSI due process by basing its findings on allegations that were not litigated. Because we held in the first appeal that PACCON was entitled to fees under the credit agreement's attorney fees clause, which included collections costs, the fees awarded for collection efforts were incurred while the default judgment was on appeal and not yet a final order, and BSI had an opportunity to challenge the allegations upon which the trial court's findings were based, we affirm.
FACTS
PACCON, a Washington corporation that brokers the shipment of goods, entered into a credit agreement with BSI, a Montana corporation that sells and installs commercial baking equipment. The agreement involved PACCON's arrangement of the shipping of BSI's commercial ovens. When BSI failed to pay PACCON for the shipping services, PACCON sued BSI in Snohomish County Superior Court. On May 19, 2006, PACCON obtained a default judgment against BSI for approximately $109,000 for the outstanding shipping charges, interest, and attorney fees.
These attorney fees are not at issue in this appeal.
In October of 2006, PACCON began the process of collecting on the judgment by registering the judgment in Montana. In January 2007, PACCON obtained a writ of execution in Montana and sought to execute upon approximately $102,000 from BSI's Montana bank account. BSI then moved to quash the writ, but the motion was denied. BSI also moved to vacate the default judgment in Snohomish County Superior Court, contending that it was void for deficient service of process. BSI further alleged that PACCON was liable for damages resulting from shipping delays.
On February 27, 2007, the trial court denied BSI's motion without prejudice, allowing BSI to refile the motion following further discovery. The court's order on this motion also stated: "Plaintiff is entitled to attorneys' fees and costs incurred in connection with responding to and appearing at the hearing on the defendant's Motion, such fees to be awarded upon further application to the Court." PACCON then moved for attorney fees and costs incurred in Washington and Montana. On March 29, 2007, the court entered a judgment against BSI for attorney fees and collection costs totaling $37,327.29.
BSI appealed the default judgment, the trial court's order denying its motion to vacate, and the award of attorney fees. While the appeal was pending, PACCON pursued collection of the unpaid portion of the default judgment and the judgment for attorney fees and costs. In doing so, PACCON's attorneys attempted to determine the nature and structure of BSI's assets; conducted a debtor's examination of BSI's president, David Roberts; attempted to garnish BSI's accounts; obtained and analyzed BSI's financial documents; and determined existing liens against BSI, including federal tax liens. PACCON also arranged for the appointment of a receiver and was required to guarantee the receiver's fees. The receiver submitted a report of his findings to the Montana Court, which included findings that BSI transferred its assets to another company wholly owned by Roberts in a fraudulent attempt to prevent PACCON from collecting on the two judgments.
On January 28, 2008, we issued our opinion on the appeal, affirming the trial court's denial of the motion to vacate and concluding that "[u]nder the terms of the credit agreement, PACCON was entitled to the recovery of reasonable attorney fees and collection costs." But because the trial court failed to enter findings of fact and conclusions of law in support of the fee award, we were unable to review BSI's challenge to the amount of the award and remanded for entry of findings and conclusions. We also held that PACCON was entitled to attorney fees on appeal and ordered the superior court to determine that amount on remand.
Pac. Cont'l Shippers, LLC v. Baking Sys., Inc., noted at 142 Wn. App. 1045, slip op. at 10 (2008).
Id.
Id. at 11.
On remand, PACCON filed two motions for fees and costs. The first motion requested the court to enter findings and conclusions to support the March 29, 2007 attorney fees award, as ordered by this court on remand. The second motion requested an additional award for fees incurred after the trial court's denial of the motion to vacate, including fees and costs incurred in responding to the appeal.
The trial court determined that the requested fees were reasonable and necessary and entered an order granting judgment for PACCON in the amount of $97,371.52. Specifically, the court awarded postjudgment attorney fees and collection costs in the amount of $35,921.16 for "PACCON's efforts in resisting BSI's motion to vacate the default judgment;" postjudgment attorney fees and collection costs in the amount of $50,667.37 for PACCON's "collection efforts in resisting BSI's fraudulent actions to prevent BSI's assets from being available to satisfy PACCON's judgments;" and attorney fees and costs in the amount of $10,782.99 "against BSI for prosecuting the appeal."
DISCUSSION
I. Scope of Remand
BSI first contends that the trial court's award of postjudgment fees and costs incurred in Montana exceeded the scope of this court's remand. BSI argues that the trial court's order denying the motion to vacate limited the award of attorney fees to those incurred in responding to BSI's motion to vacate. That order states:
Plaintiff is entitled to attorneys' fees and costs incurred in connection with responding to and appearing at the hearing on the defendant's Motion, such fees to be awarded upon further application to the Court.
But the order that actually awarded the fees granted "judgment against Baking Systems, Inc. in the amount of $37,327.29 representing Pacific Continental Shippers, LLC's reasonable attorneys' fees and reasonable collection costs." And in ordering remand for entry of findings and conclusions in support of that fee award, we concluded that "[u]nder the terms of the credit agreement, PACCON was entitled to the recovery of reasonable attorney fees and collection costs." Thus, an award complying with the terms of the credit agreement was within the scope of the remand.
Id. at 10.
The credit agreement states in relevant part:
"If this account is not paid according to the terms set forth above, the undersigned agrees to pay, in addition to the balance owed with interest, a reasonable attorneys' fee regardless of whether suit is brought and all reasonable collection costs."
(Internal quotation marks omitted.)
As we concluded in the first appeal, the fee provision in this agreement includes both attorney fees and collection costs. Thus, the trial court's award of postjudgment fees and costs for PACCON's collection efforts in Montana was within the scope of remand.
BSI further argues that costs are limited to those listed in RCW 4.84.010 and that additional costs for airline tickets, parking fees, and Westlaw research went beyond what was allowable under the statute. But as the trial court noted, the fee provision referred to "all reasonable collection costs," not just those permitted by statute. Thus, the award of the additional costs was authorized by the contract's fee provision and was within the scope of remand.
See footnote 8, infra, listing costs that are allowable under the statute.
II. Timeliness of Postjudgment Fee Award
BSI also argues that the trial court erred by awarding postjudgment fees because PACCON's request for these fees was untimely under CR 54(d)(2). That rule addresses motions for attorney fees and provides:
Claims for attorneys' fees and expenses, other than costs and disbursements, shall be made by motion unless the substantive law governing the action provides for the recovery of such fees and expenses as an element of damages to be proved at trial. Unless otherwise provided by statute or order of the court, the motion must be filed no later than 10 days after entry of judgment.
The rule does not contain a similar 10 day requirement for motions for costs. Rather, CR 54(d)(1) provides that costs "shall be fixed and allowed as provided in RCW 4.84 or by any other applicable statute," and that "the clerk shall tax costs" if the party to whom costs are awarded does not file a cost bill within 10 days after the judgment.
RCW 4.84.010 defines costs allowed to prevailing parties and provides:
The measure and mode of compensation of attorneys and counselors, shall be left to the agreement, expressed or implied, of the parties, but there shall be allowed to the prevailing party upon the judgment certain sums by way of indemnity for the prevailing party's expenses in the action, which allowances are termed costs.
The statute then lists expenses considered costs, including filing fees, service of process fees, fees for service by publication, notary fees, expenses incurred in obtaining reports and records, statutory attorney and witness fees. RCW 4.84.010(1)-(7).
BSI contends that because PACCON did not file its motion seeking fees incurred in Montana until February 19, 2008, more than a year and a half after the default judgment was entered on May 19, 2006, the trial court should have denied the motion as untimely because there was no statute or court order permitting PACCON to file a motion for postjudgment fees incurred in the Montana action. But our order on remand specifically concluded that PACCON was entitled to collection costs and the Montana litigation related to the collection proceedings. Additionally, our order on remand required the trial court to determine costs incurred on appeal, which were also incurred well after 10 days from entry of the default judgment. Thus, because our order provided otherwise, PACCON was not required to request fees within 10 days under CR 54(d)(2).
III. Merger
BSI next argues that even if the credit agreement provided for collection costs, it merged into the default judgment and recovery of fees should have been limited to those permitted by the default judgment. BSI asserts that the default judgment entitled PACCON to only those fees incurred in responding to the motion to vacate. PACCON responds that BSI is barred from asserting this argument on appeal because it was not made in the trial court. PACCON further argues that even if considered by this court, the argument is without merit because applying the merger rule here would give no effect to the express collection costs language of the credit agreement's attorney fees provision.
This assertion is not entirely correct. In fact, the default judgment was issued on May 16, 2006, before the court decided the motion to vacate, and did not address fees related to the motion to vacate; it simply provided for attorney fees and costs presumably related to obtaining the default order. The additional fees awarded for time spent on responding to the motion to vacate were ordered in a later order issued on February 27, 2007, where the court denied the motion to vacate and directed PACCON to apply to the court for fees. The actual fee award relating to that motion was granted in yet another order, issued on March 29, 2007.
Failure to raise an issue before the trial court generally prevents a party from raising it on appeal. "This rule affords the trial court an opportunity to rule correctly upon a matter before it can be presented on appeal." Construing broadly the arguments BSI raised below, we conclude that BSI sufficiently raised the issue in the trial court to preserve it for appellate review.
New Meadows Holding Co. v. Wash. Water Power Co., 102 Wn.2d 495, 498, 687 P.2d 212 (1984); Bogle Gates PLLC v. Holly Mountain Res., 108 Wn. App. 557, 562, 32 P.3d 1002 (2001).
New Meadows, 102 Wn.2d at 498.
BSI asserts that it raised this argument to the trial court, citing to pages 13-15 of its brief in response to PACCON's request for attorney fees and noting that it relied on Allison v. John M. Biggs, Inc., a case that supports its merger argument. Our review of the record indicates that BSI cited the Allison case in support of its argument that PACCON's motion for postjudgment fees was untimely under CR 54. While this is not the same argument as the merger argument made on appeal, BSI's reliance on Allison in the trial court is sufficient to preserve the merger issue for appeal. Allison, an Idaho case, held that the trial court lacked authority to order postjudgment attorney fees incurred after the time period allowed for filing costs with the court. In doing so, the court noted that "after judgment a cause of action based on a note is merged into the judgment thereby extinguishing the note as the basis for postjudgment collection proceedings," citing a Washington Court of Appeals case, Woodcraft Construction, Inc. v. Hamilton. Thus, we review the merger issue.
121 Idaho 567, 826 P.2d 916 (1992).
Specifically that portion of the brief states: "By the time limitation contained in CR 54, Washington law prevents recovery of Post-Judgment Collection Attorney Fees. See e.g., Allison v. John M. Biggs, Inc., 121 Idaho 567, 826 P.2d 916 (1992)."
826 P.2d at 917 (citing Woodcraft Constr., Inc., v. Hamilton, 56 Wn. App. 885, 786 P.2d 307 (1990)).
Our courts have recognized that "[a]s a general rule, when a valid final judgment for the payment of money is rendered, the original claim is extinguished, and a new cause of action on the judgment is substituted for it." In both Woodcraft and Caine, the court held that because a judgment based upon a promissory note extinguished the note, the note's attorney fee provision merged into the judgment and ceased to exist, providing no basis for an attorney fees award. But "[a]n appeal from a judgment entered in the trial court is not final until it is affirmed and the case mandated. Thus, provisions in a contract or a note providing attorney fees do apply until the judgment is final." Here, despite BSI's assertions to the contrary, the record indicates that the May 16, 2006 default judgment, the February 27, 2007 order denying the motion to vacate, and the March 29, 2007 order awarding fees were all appealed to this court. Thus, none of the orders became final until we affirmed and issued a mandate. The attorney fees provision in the credit agreement therefore applied to postjudgment attorney fees and collection costs incurred until our mandate was issued.
Woodcraft, 56 Wn. App. at 888; Caine Weiner v. Barker, 42 Wn. App. 835, 837, 713 P.2d 1133 (1986).
Woodcraft, 56 Wn. App. at 888 (citing Puget Sound Mut. Sav. Bank v. Lillions, 50 Wn.2d 799, 314 P.2d 935 (1957), cert. denied, 357 U.S. 926 (1958); RCW 4.84.330).
IV. Reasonableness of Fee Award
BSI next argues that the trial court's award was unreasonable because the fees claimed were for duplicative work and work unrelated to this case, and because hours were unnecessarily spent on basic legal issues and telephone conversations. "Fee decisions are entrusted to the discretion of the trial court." To calculate fee awards, courts are guided by the lodestar method, which requires the court to multiply the reasonable hourly rate by the number of hours reasonably expended on the matter. In doing so, the court must exclude any wasteful or duplicative hours and any hours pertaining to unsuccessful claims. The party seeking fees bears the burden of proving the reasonableness of the fees and must provide contemporaneous records documenting the hours worked. While this documentation "'need not be exhaustive or in minute detail, [it] must inform the court, in addition to the number of hours worked, of the type of work performed, and the category of attorney who performed the work ( i.e., senior partner, associate, etc.)'."
Mahler v. Szucs, 135 Wn.2d 398, 435, 957 P.2d 632, 966 P.2d 305 (1998).
Scott Fetzer Co. v. Weeks, 122 Wn.2d 141, 149-50, 859 P.2d 1210 (1993).
Mahler, 135 Wn.2d at 434.
Id.
Id. (quoting Bowers v. Transamerica Title Ins. Co., 100 Wn.2d 581, 597, 675 P.2d 193 (1983)).
BSI asserts that the fee award should have been reduced because it included fees for "non-legal work," "work on unsuccessful issues," and "duplicative time between two firms relating to an action in Montana." BSI does not identify the specific hours it challenges, but simply cites to an appendix to its response to the motion for fees. That appendix contains a summary of "Fees Not Recoverable," but includes only a total dollar amount for fees incurred for "Non-legal work and work performed by unidentified employees of Beresford Booth, PLLC," and "Fees not 'incurred in connection with responding to and appearing at the hearing on Defendant's Motion." It does not identify the specific billing records for the hours that it sought to exclude from the fee award.
The only specific hours BSI contests on appeal are hours it claims were for "work on unrelated issues," citing to the following billing entries: July 9, 2007, to "'draft employment letter;'" April 23, 2007, for "calls relating to 'liens against Defendant's son's New Mexico Corporation;'" August 23, 2007, for "Bonner — 'inspection of home in Billings;'" "Bonner — time spent on receivership documents for Marty Connell (who was not used);" and "Bonner/Beresford — time spent discussing and drafting emails about a fee dispute with Connell." PACCON does not address these specific billing entries, but simply argues that the attorney fees pleadings "thoroughly demonstrated to the trial court that the fees and costs it awarded PACCON in the Order were reasonable and necessary; and that PACCON complied with the lodestar methodology," and directs this court to the attorney fees pleadings.
(Emphasis omitted.)
Our review of the billing records to which BSI cites reveals only one entry that appears to be unrelated to this lawsuit. The July 9, 2007 entry was for "draft probation employment letter." Without any other information about this entry, it is unclear how this is related to this lawsuit or collection process. But it appears from the record that the challenged entry for April 23, 2007 relates to the receiver's efforts in the collection process. That entry states: "Telephone conversation with Otero County Clerk re: liens against Defendant's son's New Mexico corporation; Draft letter to Otero County Clerk re: obtaining copies of liens." According to the receiver's report, the owner of BSI also owned a company in New Mexico with his son which had an unpaid obligation to BSI. The receiver determined that that debt remains and that "[i]t was in conjunction with this project [with the New Mexico corporation] that the BSI obligation to Pacific [PACCON] was incurred." Thus, contrary to BSI's contention, this entry involved work related to the lawsuit.
The other entries cited by BSI either do not state what BSI claims they state or are not contained in the portion of the record to which BSI cites. The August 23, 2007 entries do not refer to "'inspection of home in Billings,'" as BSI claims; rather they state: "Telephone conversation with Montana co-counsel re: executing on debtor's personal property," and "Telephone call to Bonar." Without any other information to the contrary, this appears to relate to the collection process and was therefore properly included in the fee award. Nor are there any entries relating to fees involving Marty McConnell in the portion of the record to which BSI cites. Thus, without identifying the specific disputed fees, BSI's claims that these fees were unreasonable are without basis.
BSI cites only to Clerk's Papers at 225, which contains billing entries from March 29, 2007 through August 28, 2007.
BSI also asserts that the telephone records "confirm the unreliability of the time entries" because they indicate that the duration of all the calls was a total of approximately 3 1/2 to 4 hours, but the billing records indicate the bulk of the 98.60 hours billed was for telephone conversations. Our review of the billing entries indicates that several of the entries included telephone calls. But many of those entries also included other additional work, such as research, drafting letters or pleadings, or reviewing documentation. Thus, the time billed for these entries does not reflect only the telephone calls, and the telephone records do not establish that PACCON overbilled for the calls, as BSI suggests.
BSI has therefore failed to demonstrate that the trial court abused its discretion in setting the amount of the fee award. As discussed above, the only debatable charge BSI identified in the record is the one relating to drafting an "probation employment letter," which was billed at $100. The trial court's fee award otherwise complied with the lodestar approach. The court first determined reasonable hourly rates, discounting some of the claimed hourly rates for less experienced attorneys, and multiplied it by the reasonable number of hours worked, as demonstrated by the billing records submitted by PACCON.
V. Appellate Fees
BSI further contends that PACCON cannot recover fees on appeal on the attorney fees issue because PACCON did not prevail on that issue. While BSI is correct that we vacated the attorney fees award, we did not reverse the fees award, as BSI suggests. Rather, we concluded that PACCON was in fact entitled to fees, and we vacated the award as it was entered because it lacked appropriate findings. Thus, PACCON, not BSI, was the prevailing party on the attorney fees issue and was therefore entitled to fees on appeal of that issue.
VI. Due Process
Finally, BSI contends that it was entitled to due process before the trial court entered findings of fact based on allegations that related to "a separation action." Specifically, BSI contends that findings of fact 2-3, 5-6, and 15-20, which relate to the underlying contract dispute and the Montana proceedings, were based on allegations that were not litigated and that findings of fact 28, 33, 35, and 37-42, which relate to the reasonableness of the fee award, are not supported by the evidence.
Findings of fact 2-3 and 5-6 relate to the underlying dispute over BSI's failure to pay for PACCON's shipping services. Finding 2 states that BSI signed a credit agreement that included the attorney fees provision. Finding 3 states that PACCON agreed to ship goods for BSI and incurred a debt in doing so. Finding 5 states that PACCON first attempted to collect on the debt by contacting David Roberts of BSI, who at first promised to pay the debt but later threatened to file bankruptcy and told PACCON it would not get paid anything. That finding further states that Roberts "later threatened that he had two sons that were lawyers and that they would drag this collection out so long that it would cost PACCON so much that PACCON would never get paid." Finding 6 states that in August 2003, Roberts "tried to convey the impression that he had a change of heart and said [that] he was going to pay the debt."
Findings of fact 15-20 relate to the collection proceedings in Montana. Finding 15 states:
BSI had begun a scorched earth approach, to transfer substantially all of its assets to other entities and generally engaged in what appears [to] be fraudulent actions in order to prevent assets from being available to satisfy these judgments.
Finding 16 relates to the receiver's findings that: i. Sometime after September 2007 Total Baking Solutions, LLC was formed as a New Mexico LLC and was authorized to do business in Montana, and took over the business activities of BSI in late 2007 or January 2008 to avoid paying the creditor of BSI.
ii. In 2006 BSI bought and paid for a Ford Pickup costing $42,500 and a milling machine costing $45,500[.]
iii. David Roberts took $816,802.47 from BSI even though BSI had not generated profits sufficient for him to take the money out as draws.
iv. BSI's personal property was transferred to Roberts Holdings, Inc., an entity owned by David Roberts, to avoid it being executed upon by PACCON to satisfy its judgments against BSI.
Findings 17-20 state that BSI's actions to avoid paying its debt to PACCON were "fraudulent and malicious," and that the credit agreement allowed PACCON to recover attorney fees and reasonable collection costs, not just statutory costs, and included postjudgment attorney fees and costs incurred in collecting the debt.
BSI contends that the trial court made these findings based on claims that were never litigated and that BSI was deprived of procedural due process by the trial court's failure to provide it an opportunity to address or dispute them. BSI argues that because a default judgment was entered, the findings relating to the underlying dispute were never litigated. BSI further contends that the court's findings relating to fraudulent conduct related to issues that were not properly before the court and had not been litigated.
But as is clear from this appeal, the basis for attorney fees in this case was litigated and the trial court's findings in support of the fee award were based on the pleadings, affidavits, and supporting documentation submitted by the parties on the attorney fees issue. In support of its motion for fees on remand, PACCON submitted to the court the receiver's report that was filed with the Montana court which details events surrounding the transfer of BSI's assets during PACCON's collection efforts. The credit agreement was also submitted to the court with PACCON's motion for default judgment. BSI not only had an opportunity to respond to PACCON's allegations and the evidence supporting its claims, it in fact filed responsive pleadings, affidavits, and supporting documentation. BSI fails to demonstrate that it was deprived of due process in any of these proceedings nor does it cite to any authority requiring that findings in support of an attorney fees award be determined by a trial.
VII. Fees for Current Appeal
Both parties request attorney fees on appeal, citing RAP 18.1. Because PACCON is the prevailing party, we award PACCON attorney fees as provided in the credit agreement's attorney fees clause.
We affirm the trial court's order granting judgment for attorney fees and costs.