Opinion ID: 1224814
Heading Depth: 2
Heading Rank: 3

Heading: The Remaining Legal Issues (The TICR, NIED/IIED, Malice, and Punitive Damages Claims)

Text: Relying on essentially the same arguments that they made in their April 5, 1994 motion for JNOV, discussed supra, the Dixons argue that the trial court erred in accepting the jury's verdict with respect to the TICR, NIED/IIED, malice, and punitive damages claims after having ruled against Lee on the equitable issues. The Dixons maintain that, once the trial court ruled in Aiu's favor on the equitable claims, they were entitled to a directed verdict or JNOV in their favor on the remaining issues. The Dixons, however, raise other arguments, discussed infra, directly challenging the jury's verdict on all of the remaining claims, presumably in anticipation of an adverse ruling by this court. Having indeed concluded that the trial court erred in finding for Aiu on Counts I and II, we now address the arguments raised by the Dixons and Lee on the remaining claims, with the exception of malice. We need not address the malice claim further as Dixon (to whom Count V applies exclusively) raises no additional arguments on appeal.
The requisite elements of TICR are: (1) a contract between the plaintiff and a third party; (2) the defendant's knowledge of the contract; (3) the defendant's intentional inducement of the third party to breach the contract; (4) the absence of justification on the defendant's part; (5) the subsequent breach of the contract by the third party; and (6) damages to the plaintiff. Weinberg v. Mauch, 78 Hawai`i 40, 50, 890 P.2d 277, 287 (1995). The existence of a contract/settlement agreement between Lee and Aiu, and Aiu's breach thereof, are established. See supra section II.B. Based upon our examination of the record, we believe that there is substantial evidence to support the jury's findings that the Dixons were cognizant of the settlement agreement between Lee and Aiu and that they intentionally proceeded to encourage Aiu to breach that agreement by convincing him to enter into a new contract with them. The evidence further supports the finding that the Dixons were without justification, that is, that they were motivated only by their own personal gain. This is particularly so in light of: (1) Dixon's advice to Aiu that $25,000.00 for Aiu's putative interest in the Keha Place property was a ridiculous sum of money and that Aiu would be ill-advised to honor it; and (2) the Dixons' subsequent acquisition of Aiu's putative interest for that same ridiculous sum. However, because we have directed the trial court to reform the deed to reflect Lee as the sole owner, Lee may now sell the property and reap all profits therefrom. Her damages, which the jury found to be $28,500.00 (that is, the amount of the windfall that the Dixons' might have realized as a result of their tortious interference with the settlement agreement) are therefore negated. Lee, however, argues that the trial court erred in refusing to allow her to introduce evidence of her attorney's fees incurred in litigating with Aiu as an element of damages in her TICR claim. We agree. Normally, pursuant to the American Rule, each party is responsible for paying for his or her own litigation expenses. Survivors of Medeiros v. Maui Land & Pineapple Co., 66 Haw. 290, 296, 660 P.2d 1316, 1320 (1983); Thornley v. Sanchez, 9 Haw.App. 606, 618, 857 P.2d 601, 608 (1993). This general rule, however, is subject to a number of exceptions: attorney's fees are chargeable against the opposing party when so authorized by statute, rule of court, agreement, stipulation, or precedent. Id. As a matter of precedent, other jurisdictions have recognized that attorney's fees are chargeable against the wrongdoer in the context of a TICR claim. See, e.g., Dassance v. Nienhuis, 57 Mich.App. 422, 225 N.W.2d 789 (1975); Prospero Assocs. v. Redactron Corp., 682 P.2d 1193 (Colo.Ct.App. 1983). Although not in the context of a TICR claim, this court has applied the exception where the wrongful act of the defendant causes the plaintiff to litigate with a third party. In Uyemura v. Wick, 57 Haw. 102, 551 P.2d 171 (1976), we held that, where the wrongful act of the defendant[, (in this case, the Dixons' TICR),] has involved the plaintiff in litigation with [another, (in this case, Aiu) ], or placed [the plaintiff] in such relations with others as makes it necessary to incur expenses to protect his [or her] interest, such expenses, including attorneys' fees, should be treated as the legal consequences of the original wrongful act, and may be recovered as damages. Id. at 108-09, 551 P.2d at 176 (emphasis added); see also Restatement (Second) of Torts § 914(2)(1979) [hereinafter, Restatement ]. [10] Thus, where the wrongful act of a defendant causes a plaintiff to engage in litigation with a third party in order to protect his or her rights or interests, attorney's fees incurred in litigating with that third party may be chargeable against the wrongdoer as an element of the plaintiff's damages. [11] Id. at 110, 551 P.2d at 176. In order to recover attorneys' fees under this principle, the plaintiff must establish: (1) that the plaintiff had become involved in a legal dispute either because of a breach of contract by the defendant, or because of defendant's tortious conduct, that is, that the party sought to be charged with the fees was guilty of a wrongful or negligent act or breach of agreement; (2) that the litigation was with a third party, not with the defendant from whom the fees are sought to be recovered; (3) that the attorneys' fees were incurred in that third-party litigation; and (4) whether the fees and expenses were incurred as a result of defendant's breach of contract or tort, that they are the natural and necessary consequences of the defendant's act, since remote, uncertain, and contingent consequences do not afford a basis for recovery[.] Uyemura, 57 Haw. at 109, 551 P.2d at 176 (citations omitted). As previously discussed, Lee became involved in a legal dispute with Aiu because of the Dixons' tortious interference with the contractual relation between Lee and Aiu. As a natural and necessary consequence of the Dixons' tortious interference, Lee was required to litigate with Aiu, which in turn caused her to incur attorney's fees. Although some jurisdictions have held that this exception to the American Rule does not apply where the plaintiff consolidates his or her actions against both the contract breacher (in this case, Aiu) and the tortfeasor (in this case, the Dixons), we are in accord with those jurisdictions that hold that it is of no consequence whether the actions are brought together or separately. As aptly stated by the Colorado Court of Appeals, we see no reason why attorneys' fees should be recoverable when the aggrieved party files separate lawsuits against the contract breacher and the tortfeasor, but should be denied when he [or she] consolidates both into one law suit. Prospero Assocs., 682 P.2d at 1199. In such a case, the jury will be required to make a determination as to that portion of attorney's fees incurred by the plaintiff in the consolidated action that is attributable to the plaintiff's litigation with the third party, that is, Lee's litigation with Aiu. For purposes of clarity, we note that our holding in this section does not also entitle Lee to include the attorney's fees she incurred in litigating with the Dixons as an element of her TICR damages. In order to recover those attorney's fees from the Dixons, she must establish an independent exception; otherwise, the general rule that one is responsible for his or her own litigation expenses applies. On the facts of this case, Lee has successfully demonstrated that she is entitled to recover the attorney's fees she expended in litigating with the Dixons. See infra section II.C.3. Accordingly, with regard to the TICR claim, we affirm the trial court's finding of liability, but vacate the damage award and remand with instructions to retry the issue of damages. On remand, Lee will be permitted to introduce, as an element of her damages, evidence of any attorney's fees that she incurred in litigation with Aiu that were caused by the Dixons' tortious interference with the contractual relation between Lee and Aiu.
The Dixons argue that emotional distress damages are not sustainable because Lee has failed to prove that she suffered a physical injury; however, Lee also asserted a claim for IIED, which does not require proof of physical injury. The elements of IIED are: (1) that the act allegedly causing harm was intentional; (2) that the act was unreasonable [or outrageous [12] ]; and (3) that the actor should have recognized that the act was likely to result in illness.  Marshall v. University of Hawaii, 9 Haw.App. 21, 38, 821 P.2d 937, 947 (1991) (citation omitted) (emphasis added). As previously discussed, we believe that there was substantial evidence that the Dixons intentionally interfered with the settlement agreement. We also believe, based on our review of the record, that there was substantial evidence to support the jury's finding that Lee suffered emotional distress. With respect to the Dixons' conduct, the jury was presented with the following evidence: (1) Pearson-Dixon's letter to Lee (a) informing Lee that the Dixons now owned half of her home, (b) cautioning Lee to continue paying the mortgage or risk foreclosure, (c) instructing Lee not to commit waste, and (d) suggesting that Lee lower her selling price in order to accomplish a faster sale. The evidence also established that Aiu had related to Dixon that Aiu wished to leave Lee because she had changed since having been diagnosed with breast cancer and undergoing chemotherapy and that Aiu found it unbearable to live with her. Based on such evidence, and on the present record, it was reasonable for the jury to have found that the Dixons' conduct was outrageous and that such conduct was likely to result in illness. Id.
Finally, the Dixons argue that the evidence cannot sustain an award of punitive damages against them. We disagree. Punitive damages are not compensatory in nature; rather, they are designed to punish a defendant for aggravated or outrageous misconduct and to deter that defendant from similar conduct in the future. Masaki v. General Motors Corp., 71 Haw. 1, 6, 780 P.2d 566, 569, reconsideration denied, 71 Haw. 664, 833 P.2d 899 (1989). On the facts discussed in the previous section regarding the IIED claim, we hold that the present record contains substantial evidence from which the jury could find that the Dixons engaged in aggravated or outrageous misconduct. We therefore affirm the jury's award of punitive damages against both Dixon and Pearson-Dixon. On cross-appeal, Lee argues that she should have been permitted to introduce evidence of attorney's fees she incurred in litigation with the Dixons because punitive damages may be used as a method of paying an injured party's attorney's fees. We note that, in our seminal decision regarding punitive damages, this court recognized that other jurisdictions have held that paying the plaintiff's attorneys' fees is one of the purposes of punitive damages. Masaki, 71 Haw. at 8, n. 2, 780 P.2d at 572, n. 2. Recently, relying on Masaki and on the trend in the majority of our sister states, the Intermediate Court of Appeals held that we adopt the majority view that a jury should be allowed to consider a plaintiff's attorney fees in determining the amount of a punitive damages award. Kunewa v. Joshua, 83 Hawai`i 65, 77, 924 P.2d 559, 571 (App.1996); see also Romero v. Hariri, 80 Hawai`i 450, 911 P.2d 85 (App.1996). When considering attorney's fees in calculating the amount of the punitive damage award, the fee amount must be reasonable and necessary. Jolley v. Puregro Company, 94 Idaho 702, 496 P.2d 939, 947 (1972). Attorneys' fees cannot be awarded in addition to exemplary damages; rather, they must constitute the whole of the punitive damage award or be accounted for as a portion of the total punitive damage award. 22 Am.Jur.2d § 808 (1988); Romero, 80 Hawai`i at 458-59, 911 P.2d at 93-94 (affirming the trial court's ruling that the motion for attorneys' fees is denied inasmuch as the Court finds that the punitive damages will cover, not only the punishment and deterrence aspect, but [also payment of the plaintiff's attorney's fees]). And, [w]hether to award punitive damages and the determination of the amount are within the sound discretion of the trier of fact, whether judge or jury. Restatement, supra, § 908, comment (d). Therefore, because facilitating payment of a plaintiff's attorney's fees is one of the purposes of punitive damages, we hold that the trial court erred in prohibiting Lee from presenting the jury with evidence of her attorney's fees incurred in litigating with the Dixons. We therefore affirm the jury's finding that punitive damages are warranted, vacate the award of $25,000.00 against Dixon and the award of $15,000.00 against Pearson-Dixon, and remand with instructions to retry the issue of punitive damages. On remand, Lee will be permitted to introduce, as an element of punitive damages, evidence of any attorney's fees that she incurred in litigation with the Dixons.