Case Title: Cowardin v. Finnerty

Citation: 

Docket Number: 98-292

State: wyoming

Court: Wyoming Supreme Court

Date: 1999-12-28T00:00:00Z

Document:
Cowardin v. Finnerty1999 WY 181994 P.2d 335Case Number: 98-292Decided: 12/28/1999Supreme Court of Wyoming
 
ANNE 
L. COWARDIN and GEORGE BACH, Appellants (Plaintiffs),

v.

JAMES L. FINNERTY and 
JUDY L. FINNERTY, Appellees (Defendants).

 

Appeal from the District 
Court of Albany County: The Honorable Jeffrey A. Donnell, 
Judge.

Jo Ann Fulton of 
Fulton Law Office, Laramie, WY., representing 
appellants.

Mason F. Skiles 
and Joseph A. Rodriguez of Skiles & Rodriguez, Laramie, WY., representing 
appellees.

Before 
LEHMAN, C.J., and THOMAS, MACY, GOLDEN, and HILL, JJ.

LEHMAN, Chief 
Justice.

[¶1]      Appellants Anne 
L. Cowardin and George Bach (Purchasers) appeal the district court's order 
denying their motion for attorney fees and rejecting their claim for breach of 
the implied covenant of good faith and fair dealing. We find the district court 
properly denied Purchasers' motion for attorney fees and affirm that portion of 
the judgment. We also find the district court properly dismissed the claim for 
breach of the implied covenant, and we affirm that portion of the judgment, 
although on different grounds. We find, however, that the district court erred 
in awarding Sellers attorney fees as costs under the purchase agreement and 
reverse that portion of the judgment.

ISSUES

[¶2]      Appellants raise 
two issues for review:

I. Whether the 
district court erred in denying Purchasers' motion for attorney fees; 
and

II. Whether the 
district court applied the correct standard of review in dismissing the claim 
for breach of the implied covenant of good faith and fair 
dealing.

FACTS

[¶3]      On September 2, 
1995, Purchasers entered into an agreement to lease from Sellers a bed and 
breakfast located in Laramie. Pursuant to the terms of the lease agreement, 
Purchasers took possession of the premises immediately. The lease agreement was 
for a term of one year with automatic renewal for additional one-year terms or 
expiration upon purchase of the premises by Purchasers.

[¶4]      Three weeks after 
the lease agreement was signed, on September 22, 1995, Purchasers entered into 
an agreement to buy the bed and breakfast. The agreed purchase price for the 
property was $200,000, and Purchasers provided an earnest money payment of 
$5,000. The purchase agreement provided that it was contingent upon Purchasers 
obtaining financing from Key Bank of Laramie prior to closing. The agreement 
also provided, in the event Purchasers were unable to obtain financing, "the 
earnest money less costs incurred by Sellers shall be refunded to 
Purchaser."

[¶5]      On October 24, 
1995, Key Bank of Laramie denied Purchasers' application for financing. 
Purchasers notified Sellers they were unable to obtain financing, terminated the 
purchase agreement, vacated the premises, and requested a refund of the $5,000 
earnest money payment. Sellers denied the request, claiming costs in excess of 
$5,000 associated with damage sustained during Purchasers' possession of the 
property and for legal fees incurred in preparation of the purchase 
documents.

[¶6]      Purchasers filed 
a Complaint on September 27, 1996, claiming that Sellers breached the purchase 
agreement and the implied covenant of good faith and fair dealing in refusing to 
refund the earnest money payment. Purchasers sought damages in the amount of 
$5,000 for breach of contract and a minimum of $1,000 for breach of the implied 
covenant. Purchasers also sought to recover their costs and attorney fees 
incurred in enforcing the purchase agreement.

[¶7]      On May 26, 1998, 
after a bench trial, the district court issued a decision letter finding that 
Purchasers were entitled to the return of the $5,000 earnest money payment less 
costs in the amount of $690 for legal fees incurred by Sellers in preparation of 
the purchase documents. The court also determined that Purchasers' claims for 
breach of the implied covenant and attorney fees should be 
denied.

[¶8]      With respect to 
the issue of attorney fees, the court cited the applicable rule that, absent 
statutory authorization or contractual provision, each party is normally 
responsible for his or her own attorney fees. Finding no such statutory 
authority or contractual provision in this case, the court denied Purchasers' 
request for attorney fees.

[¶9]      As for 
Purchasers' claim for breach of the implied covenant of good faith and fair 
dealing, the court applied the standards set forth in McCullough v. Golden Rule 
Ins. Co., 789 P.2d 855 (Wyo. 1990) and Darlow v. Farmers Ins. Exch., 822 P.2d 820 (Wyo. 1991) and held that Sellers' refusal to repay the earnest money was 
"fairly debatable" given their claim for costs. On that basis, the court 
dismissed the claim for breach of the implied covenant. Findings of Fact, 
Conclusions of Law and Judgment incorporating the decision letter were signed by 
the district court on June 16, 1998. Purchasers then filed a Motion for Award of 
Attorney's Fees and Costs on June 30, 1998. The district court entered an order 
on September 4, 1998, awarding costs but declining to reconsider its prior 
ruling on Purchasers' motion for attorney fees. This appeal 
followed.

STANDARD OF 
REVIEW

[¶10]   We review district court 
determinations concerning attorney fees under an abuse of discretion standard. 
Johnston v. Stephenson, 938 P.2d 861, 862 (Wyo. 1997). A court abuses its 
discretion only when it acts in a manner which exceeds the bounds of reason. 
Goff v. Goff, 844 P.2d 1087, 1092 (Wyo. 1993). The burden is placed on the party 
attacking the district court's ruling to establish an abuse of discretion, and 
the ultimate issue is whether the court could reasonably conclude as it did. 
Id.

[¶11]   With respect to Purchasers' second 
issue, i.e., whether the district court applied the proper standard to the claim 
for breach of the implied covenant, we review a district court's conclusions of 
law de novo. Springer v. Blue Cross and Blue Shield of Wyoming, 944 P.2d 1173, 
1175 (Wyo. 1997).

DISCUSSION

Attorney 
Fees

[¶12]   As the district court stated in its 
decision letter, we have previously addressed the issue of when parties are 
entitled to recover attorney fees. In Hamilton v. Town of Greybull, 942 P.2d 410, 411 (Wyo. 1997), we stated:

Wyoming follows 
the American rule that each party is normally responsible for his or her own 
attorney fees. There are two exceptions to this rule: when there is an express 
statutory authorization or a contractual provision that allows for an award of 
attorney fees to a party. We have denied attorney fees where neither exception 
is applicable.

(Quoting 
Snodgrass v. Rissler & McMurry Co., 903 P.2d 1015, 1017 (Wyo. 1995) 
(citations omitted).) See also McLain v. Anderson, 933 P.2d 468, 472 (Wyo. 
1997).

[¶13]   Purchasers argue that this case 
falls within the contractual provision exception to the American rule. 
Purchasers point to the following paragraph of the purchase agreement in support 
of their argument:

13. Time is of 
the essence hereof, and if any payment or any other condition hereof is not 
made, tendered, performed by either the Sellers or Purchaser as herein provided, 
then this Contract, at the option of the party who is not in default or breach, 
may at the party's option be terminated by such party, in which case the 
non-defaulting party may recover such damages as may be proper or such 
party may require specific performance of the other 
herein.

(Emphasis 
added.) Purchasers argue that this provision allows them to recover the damages 
they suffered as a result of Sellers' breach. The damages they suffered, 
Purchasers argue, are the attorney fees they incurred in enforcing the earnest 
money provision of the purchase agreement.

[¶14]   We have said that "[i]n order to 
recover attorney's fees under a contract, the agreement must unequivocally 
provide for such recovery." Coulter v. City of Rawlins, 662 P.2d 888, 904 (Wyo. 
1983). Thus, in Coulter, we overturned an award of attorney fees where the plain 
language of the contract contained no reference to attorney fees. We said, "[i]f 
the parties had intended attorney's fees to be paid . . . they should have said 
so.' Id. Likewise, in this case, if the parties intended attorney fees to be 
recoverable, they should have expressly said so in their agreement. The purchase 
agreement contains no language concerning attorney fees. Absent any such 
language, Purchasers' request for attorney fees was properly 
denied.

[¶15]   Having concluded that Purchasers 
were not entitled to attorney fees under the purchase agreement, we likewise 
must conclude that Sellers were not entitled to attorney fees. Paragraph 2 of 
the purchase agreement provides that if Purchasers were unable to obtain 
financing, the earnest money less "costs incurred by Sellers" shall be refunded. 
Neither this paragraph nor any other provision of the purchase agreement 
provides for recovery of attorney fees. Given the absence of any reference to 
attorney fees in the purchase agreement, Sellers were not entitled to recover 
attorney fees. The district court's ruling allowing Sellers to recover attorney 
fees as costs under paragraph 2 of the contract is inconsistent with the rule we 
have adopted that, absent statutory or contract language expressly authorizing 
recovery of attorney fees, parties are responsible for payment of their own 
attorney fees. Therefore, the district court's order allowing Sellers to recover 
legal fees in the amount of $690.00 is reversed.

The Implied 
Covenant of Good Faith and Fair Dealing

[¶16]   We now turn to the question whether 
the district court applied the proper standard in reviewing Purchasers' claim 
for breach of the implied covenant of good faith and fair dealing. Purchasers 
argue that the district court applied an incorrect standard of review when it 
applied the standard set forth in McCullough v. Golden Rule Ins. Co., 789 P.2d 855 (Wyo. 1990) and other insurance bad faith cases. In the alternative, 
Purchasers argue that, even assuming the district court applied the correct 
standard, the evidence does not support the district court's finding that 
Sellers' refusal to refund the earnest money was fairly debatable. We find that 
the district court was correct in dismissing the claim, but base our 
determination on different grounds. Therefore, we do not reach the issues raised 
by Purchasers.

[¶17]   In Wyoming, we have recognized that 
breach by a contracting party of an independent duty which arises out of the 
contractual relationship may give rise to an action in tort for breach of the 
implied covenant of good faith and fair dealing. We have recognized the cause of 
action in the context of insurance contracts, McCullough, 789 P.2d 855, and we 
have recognized the cause of action in the context of employment contracts. 
Wilder v. Cody Country Chamber of Commerce, 868 P.2d 211 (Wyo. 1994). We have 
expressly declined to extend the cause of action for breach of the implied 
covenant to allow recovery in tort for consequential damages resulting from the 
failure to pay sums due under a construction contract. JBC of Wyoming Corp v. 
City of Cheyenne, 843 P.2d 1190 (Wyo. 1992). We have said "[f]ailure to pay sums 
due under a contract . . . is clearly ex contract rather than ex delicto." Id. 
at 1197.

[¶18]   Purchasers' claim for breach of the 
implied covenant arises from Sellers' refusal to refund the earnest money as 
provided in the purchase agreement. It arises, in other words, from Sellers' 
failure to pay sums due under the contract. It is, therefore, clearly ex 
contractu (from the contract) rather than ex delicto (from a tort). See Loghry 
v. Unicover Corp., 927 P.2d 706 (Wyo. 1996). Under these circumstances, 
dismissal of Purchasers' claim for breach of the implied covenant of good faith 
and fair dealing was proper. As stated in Loghry, "Wyoming does not recognize a 
cause of action for breach of the covenant of good faith and fair dealing under 
a contract theory." 927 P.2d  at 711-12.

CONCLUSION

[¶19]   The district court properly 
dismissed Purchasers' claim for breach of the implied covenant of good faith and 
fair dealing and denied Purchasers' request for payment of attorney fees. 
However, the district court improperly awarded Sellers legal fees as costs under 
the contract. We, therefore, reverse that portion of the judgment awarding 
Sellers legal fees.

[¶20]   Affirmed in part and reversed in 
part.