Wednesday, August 15, 2012

ICA: Equitable Contribution Action not in Nature of Assumpsit (so no Fees)

Kim v. Kam (ICA August 10, 2012)

Background. Robert Kim, Nancy Kam, and others entered into an attorney-client contract with Matthew Pyun to represent them in bringing an action against their older brother and his handling of their deceased mother's property. Under the contract, Pyun was paid $45,000 and 25% contingency of any amount received through settlement, judgment, or award. The case settled. Based on the value of the recovered property, Pyun sent a bill of $917,529.12 to the parties. When they failed to pay, Pyun sued them. The court ultimately entered judgment against the parties and for Pyun. They ended up settling with Pyun for $767,000. They agreed that as long as they complied with the settlement, Pyun would agree not to enforce the judgment. If the parties breached the settlement agreement, however, the judgment would be immediately enforceable. Kam and the others paid Pyun only $736,000.

Years later, Kim tried to refinance the property, but discovered that Pyun put a lien against it. Kim interpreted the lien as a breach of the settlement agreement. Kim sued Pyun. Pyun prevailed. Ultimately, he was awarded $220,268.05. Kim then filed a complaint against Kam et al.--this case--seeking equitable contribution for payment of the judgment. Some defendants filed motions to dismiss or judgment on the pleadings. They were granted. The defendants sought attorneys' fees and costs in the amount of $17,517.58. The circuit court awarded the defendants and entered judgment against Kim. Kim appealed.

Award of Attorneys' Fees "in all Actions in the Nature of Assumpsit." Absent a statute or contract, each party is generally responsible for his or her own fees and costs. Ranger Ins. Co. v. Hinshaw, 103 Hawai'i 26, 31, 79 P.3d 119, 124 (2003). However, one statutory exception comes from HRS § 607-14. "[I]n all actions in the nature of assumpsit . . . there shall be taxed as attorneys' fees, t be paid by the losing party . . ., a fee that the court determines to be reasonable[.]" HRS § 607-14. Assumpsit permits "the recovery of damages for the non-performance of a contract, either express or implied written or verbal, as well as quasi contractual obligations." Leslie v. Estate of Tavares, 93 Hawai'i 1, 5, 994 P.2d 1047, 1051 (2000). "When the recovery of money damages is not the basis of a claim factually implicating a contract, the action is not in the nature of assumpsit." Id. at 7, 994 P.2d at 1053. Furthermore, claims of rescission and restitution are considered actions in the nature of assumpsit. Hong v. Kong, 5 Haw. App. 174, 683 P.2d 833 (1984). Equitable claims of unjust enrichment are also "in the nature of assumpsit." Porter v. Hu, 116 Hawai'i 42, 66, 169 P.3d 994, 1018 (App. 2007).

The Nature of Equitable Contribution is not of Assumpsit. Here, Kim sued Kam for equitable contribution. Resorting to cases outside Hawai'i, the ICA noted that this equitable contribution "is the right to recover from a co-obligor that shares liability with the party seeking contribution[.]" Crowley Maritime Corp. v. Boston Old Colony Ins. Co., 70 Cal. Rptr. 3d 605, 608 (2008); Sound Built Homes, Inc. v. Windermere Real Estate/South, Inc., 118 Wash. App. 617, 633-34, 72 P.3d 788, 797 (2003). This right is not founded on an agreement and is not contractual in nature. 18 Am. Jur. 2d Contribution § 4 (2004).

Here, the ICA held that Kim's complaint sought equitable contribution from Kam and the others in paying for his judgment debt to Pyun. The ICA noted that even though Kam and the others became co-obligors through a contract with Pyun, "Kim was not seeking recovery of damages under the contract--there was not contract between Kim and [the] Defendants." Nor was Kim seeking quasi-contractual obligations for unjust enrichment. In short, the ICA held that the fact that the underlying contract and settlements formed the basis for Kim's claim for equitable contribution did not render the claim in the nature of assumpsit. Thus, the trial court abused its discretion in awarding attorneys' fees to Kam and the others.

Finding Assumpsit in Porter v. Hu (but not here). The line between actions in the nature of assumpsit and those that are not is getting harder to discern. Equitable claims are "within the realm of assumpsit" when it is for unjust enrichment. Porter v. Hu, 116 Hawai'i at 66, 169 P.3d at 1018. So how come equitable contribution is not in the nature of assumpsit? True, there are treatises and cases that point in that direction, but it is unclear exactly why the equitable obligation to contribute to a debt owed--especially a debt flowing from a judgment or contract--is not "in the nature of assumpsit." The ICA cited American States Ins. Co. v. National Fire Ins. Co. of Hartford, 135 Cal. Rptr. 3d 177, 182 (2011). There, the California court noted that "an action for equitable contribution is rooted in equity, not contract." Id. Again, that may be so, but how does this square with Porter v. Hu? Unjust enrichment is rooted in equity, but somehow that is still in the nature of assumpsit. So how come equitable contribution isn't?

Furthermore, how close to "assumpsit" does an action have to be to fall within the ambit of HRS § 607-14? Should the court put any significance to the fact that the statute reads "in the nature of assumpsit" rather than "assumpsit"? Does the plain language suggest that actions that are kind of contractual--like unjust enrichment or restitution--in the "nature" of assumpsit even though they are not squarely in assumpsit? And if that is the case, wouldn't equitable contribution be among them? Not so, held the ICA.

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