Date: 01-20-2007

Case Style: BOSTON AVENUE MANAGEMENT, INC. v. ASSOCIATED RESOURCES, INC.

Case Number: 2007 OK 5

Judge: Lavender

Court: Supreme Court of Oklahoma on appeal from the District Court of Tulsa County

Plaintiff's Attorney:

James Kincaid of CROWE & DUNLEVY, Tulsa, Oklahoma

Defendant's Attorney:

Steve McNamara and Brian Gaskill, SNEED LANG, P.C., Tulsa, Oklahoma

Description:

1 We decide in this case whether the Court of Civil Appeals (COCA), Division III erred in reversing a trial court order denying Defendant/Appellant, Associated Resources, Inc.'s (Associated) motion for attorney fees and costs against Plaintiff/Appellee, Boston Avenue Management, Inc. (Boston) and remanding for determination of an award of attorney fees to Associated. The COCA's decision relied on 12 O.S. § 1101.1 as authority for the attorney fee award. Section 1101.1 concerns offers of judgment, counteroffers of judgment and the effect thereof on the propriety of the recovery of litigation costs and attorney fees in certain civil actions and in certain circumstances. We hold the COCA erred and that § 1101.1 does not authorize an award of attorney fees or costs to Associated against Boston. The COCA's opinion is vacated and the trial court order denying attorney fees and costs to Associated is affirmed.1

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

2 Boston sued Associated for monetary relief for allegedly failing to pay the proper holdover rent required by two lease agreements. Associated filed an Offer of Judgment (hereafter Offer) pursuant to § 1101.1(B). The Offer sets forth in pertinent part that Associated "offers to allow judgment to be taken against it for the amount of $3,934.24." Boston did not accept the Offer.

3 Thereafter, Boston filed a First Amended Petition against Associated containing two counts.2 Basically, each count concerned a separate lease and alleged Plaintiff, Office Design, Inc. (Office Design), as landlord, entered the lease agreements with Associated, as tenant. The First Amended Petition alleged that subsequent to execution of the leases Boston purchased the leased premises and assumed the role of landlord. Each count essentially alleged the respective lease involved had a "holding over" clause, that Associated remained in possession of the premises after expiration of the terms of the leases for certain periods of time, but failed to pay the holdover rent for such periods required to be paid by the terms of each lease. Count I sought $14,897.25, plus attorney fees, costs and other proper relief; count II sought $3,834.24, plus attorney fees, costs and other proper relief.

4 Associated moved for "summary judgment," asserting Boston was not the real party in interest to bring the suit. Associated's "summary judgment" motion was sustained solely on the basis Boston was not the real party in interest to sue under the leases (apparently because Boston had not received a valid assignment of the leases from Office Design) and the "summary judgment" order ostensibly dismissed with prejudice Boston's causes of action against Associated on that basis. However, obviously in an attempt to comply with 12 O.S.2001, § 2017(A), the dismissal was entered without prejudice to the right of Office Design to intervene to assert any causes of action previously asserted by Boston. Section 2017(A) provides in part that "[n]o action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed after objection for ratification of commencement of the action by, or joinder or substitution of, the real party in interest ...." The real party in interest "summary judgment" ruling was made by a different trial judge than the judge that denied Associated's motion for attorney fees and costs. The appellate record does not contain the parties' trial court "summary judgment" submissions, but does contain the "summary judgment" order, entitled Journal Entry of Judgment.

5 Office Design intervened and filed a Second Amended Petition that Associated concedes on appeal asserted the same causes of action against Associated as previously asserted by Boston.3 Although Boston is listed in the caption of the Second Amended Petition as a plaintiff, Boston is not mentioned in the body thereof.

6 Next, as pertinent here, Associated filed a motion for attorney fees and costs against Boston, citing § 1101.1(B) as support. Essentially, Associated argued § 1101.1(B) allowed it to recover attorney fees and costs against Boston because Boston did not recover a favorable judgment against Associated in any amount. Basically, Associated relied on the provisions of § 1101.1(B)(3) that provide:

If no offer of judgment or counteroffer of judgment is accepted and the judgment awarded the plaintiff is less than one or more offers of judgment, the defendant shall be entitled to reasonable litigation costs and reasonable attorney fees incurred by the defendant with respect to the action or the claim or claims included in the offer of judgment from and after the date of the first offer of judgment which is greater than the judgment until the date of the judgment. Such fees and costs may be offset from the judgment entered against the offering defendant.

7 Prior to the trial court's ruling on Associated's motion for attorney fees and costs, Office Design (purportedly joined by Boston) filed a dismissal without prejudice of the suit. After supplemental and responsive submissions and oral argument regarding Associated's quest for attorney fees and costs, the trial court denied Associated's motion for attorney fees and costs. One basis for the trial court's denial was, in effect, a realization § 1101.1 was not applicable because the "summary judgment" ruling in favor of Associated and against Boston on the real party in interest issue was not an actual adjudication of the causes of action brought against Associated and was not a judgment within the contemplation of § 1101.1. In other words, the same claims or causes of action initiated by Boston against Associated were allowed to continue through Office Design's intervention or substitution as the real party in interest plaintiff. Associated appealed the denial.4

8 The COCA, one judge dissenting, concluded that § 1101.1 did provide a statutory basis for an attorney fee award. In effect, the COCA's majority saw the issue as whether for the purposes of the recovery of attorney fees and costs under § 1101.1, a judgment in favor of a defendant (i.e., a judgment where the plaintiff recovers nothing) should have the same effect as a judgment in favor of the plaintiff but one that is less than the Offer.5 The majority answered the question in the affirmative and thus, reversed the trial court's order and remanded with direction to the trial court to determine an award of attorney fees to Associated. Boston sought certiorari, which we previously granted.6

9 We now hold the COCA erred and, like the trial court, are of the view that the "summary judgment" ruling on the real party in interest issue was not a judgment within the contemplation of § 1101.1 and cannot be considered an actual adjudication of the action or claims with respect to the Offer made by Associated to Boston sufficient to invoke the provisions of § 1101.1(B) concerning the recovery of attorney fees and costs. Section 1101.1(B) does not authorize an award of attorney fees or costs unless there has been a judgment entered as to the action or the claim or claims included in the Offer, something that has not occurred here. The grant of "summary judgment" against Boston cannot be deemed a judgment sufficient to invoke the provisions of § 1101.1(B) because it was based solely on a determination Boston was not the real party in interest and the suit against Associated was allowed to continue through Office Design's intervention and, in effect, its substitution as the real party in interest plaintiff to assert the causes of action or claims against Associated.7

ANALYSIS

10 The focus of this appeal involves legal questions concerning the meaning of two legislative enactments, § 1101.1(B) and § 2017(A), and the interplay of the two statutes in the circumstances of this case. Involving questions of law relating to statutory interpretation, the appropriate appellate standard of review is de novo, "i.e., a non-deferential, plenary and independent review of the trial court's legal ruling[s]." Fulsom v. Fulsom, 2003 OK 96, 2, 81 P.3d 652, 654, citing Samman v. Multiple Injury Trust Fund, 2001 OK 71, 8 and n. 5, 33 P.3d 302, 305 and n. 5.

11 We also recognize the following general rules concerning statutory interpretation. When called on to determine the meaning of a statute, a court's primary goal is to ascertain and then follow the intention of the Legislature. See TRW/Reda Pump v. Brewington, 1992 OK 31, 829 P.2d 15, 20. Legislative intent is ascertained by reviewing the whole act in light of its general purpose and object. Id. Fulsom further delineated certain well recognized principles concerning statutory interpretation. Fulsom states:

The plain meaning of a statute's language is conclusive except in the rare case when literal construction would produce a result demonstrably at odds with legislative intent. Also, a court is duty-bound to give effect to legislative acts, not to amend, repeal or circumvent them. A universally recognized principle in cases when a court is called on to interpret legislative enactments is that the court is without authority to rewrite a statute merely because the legislation does not comport with the court's conception of prudent public policy.

Fulsom, 2003 OK 96, 7, 81 P.3d at 655. (citations omitted).

12 Fulsom also set out salient general rules regarding the recovery of attorney fees and statutory interpretation of enactments asserted to support an attorney fee allowance. In Fulsom the following is found:

This Court stated the following in State ex rel. Tal v. City of Oklahoma City, 2002 OK 97, 16, 61 P.3d 234, 243, concerning the well-known American Rule as to the recovery of attorney fees in litigation:

Oklahoma follows the American Rule ... . The Rule is generally that each litigant pays for their own legal representation and our courts are without authority to assess attorney fees in the absence of a specific statute or contract allowing for their recovery. Exceptions to the Rule are narrowly defined and carved out with great caution because it is understood liberality of attorney fee awards against the non-prevailing party has a chilling effect on our open access to courts guarantee. [Citations omitted.]

Oklahoma jurisprudence, thus, recognizes that attorney fee statutes are strictly applied because to do otherwise holds out the real possibility of chilling access to the courts. For an award of attorney fees to be authorized under a particular statute the authorization must be found within the strict confines of the involved statute. Further, if the involved attorney fee statute requires interpretation it may be read in context with other parts of the statute and in light of the law in effect at the time of its enactment.

Fulsom, 2003 OK 96, 8, 81 P.3d at 655. (citations omitted).

13 Contrasted with the recognized purpose or rationale behind our jurisprudence following the American Rule are the general policy reasons supporting the recovery of attorney fees and costs, to wit: the encouragement of settlement and discouragement of the bringing of frivolous claims. Hicks v. Lloyd's General Ins. Agency, Inc., 1988 OK 97, 763 P.2d 85, 86. "These considerations recognize the limited availability of judicial resources and seek to penalize those [who] unnecessarily waste them." Id. It is also generally recognized that the purpose of offer of judgment statutes "is to encourage judgments without protracted litigation" by "provid[ing] additional incentives to encourage a plaintiff to accept a defendant's offer to confess judgment" and to encourage a defendant "to offer an early confession of judgment [to] avoid further increases in costs which may be incurred [for] trial preparation." See Dulan v. Johnston, 1984 OK 44, 687 P.2d 1045, 1047 (construing 12 O.S.2001, § 1101, an offer of judgment statute allowing the recovery of costs in certain situations); see also Hopkins v. Byrd, 2006 OK CIV APP 132, 7, 146 P.3d 864, 866 (citing and quoting Dulan v. Johnston and opining that purpose of § 1101.1 is the same as § 1101).8

14 Title 12 O.S.Supp.2006, § 1101.1(B)(1) and (3) provide:

B. Other actions.

1. After a civil action is brought for the recovery of money or property in an action other than for personal injury, wrongful death or pursuant to Chapter 21 of Title 25 or Section 5 of Title 85 of the Oklahoma Statutes, any defendant may file with the court, at any time more than ten (10) days prior to trial, an offer of judgment for a sum certain to any plaintiff with respect to the action or any claim or claims asserted in the action. An offer of judgment shall be deemed to include any costs and attorney fees otherwise recoverable unless it expressly provides otherwise. If an offer of judgment is filed, the plaintiff or plaintiffs to whom the offer of judgment is made shall, within ten (10) days, file:

a. a written acceptance or rejection of the offer, or

b. a counteroffer of judgment, as described in paragraph 2 of this subsection.

If a plaintiff fails to file a timely response, the offer of judgment shall be deemed rejected. The fact an offer of judgment is made but not accepted or is deemed rejected does not preclude subsequent timely offers of judgment.

....

3. If no offer of judgment or counteroffer of judgment is accepted and the judgment awarded the plaintiff is less than one or more offers of judgment, the defendant shall be entitled to reasonable litigation costs and reasonable attorney fees incurred by the defendant with respect to the action or the claim or claims included in the offer of judgment from and after the date of the first offer of judgment which is greater than the judgment until the date of the judgment. Such costs and fees may be offset from the judgment entered against the offering defendant.9

15 In our view the plain language of § 1101.1(B)(3) provides that there must be some type of final adjudication, i.e., conclusion, to the action or the claim or claims included in the offer of judgment for an attorney fee and cost recovery to be triggered. Here, the "summary judgment" relied on by Associated cannot be considered a final adjudication or conclusion of the action or the claims included in Associated's Offer to Boston. This is so for two main reasons. One, by obtaining the "summary judgment" ruling Associated itself, in effect, convinced the trial court by its real party in interest objection that the claims asserted against it were not the claims of Boston but were the claims of Office Design. Two, the very same claims asserted against Associated by Boston were allowed to go forward through Office Design's intervention in the case and, in effect, its substitution for Boston as the real party interest to assert those claims against Associated.10

16 Section 2017(A) provides:

A. REAL PARTY IN INTEREST. Every action shall be prosecuted in the name of the real party in interest. An executor, administrator, guardian, bailee, trustee of an express trust, a party with whom or in whose name a contract has been made for the benefit of another, or a party authorized by statute may sue in his own name without joining with him the party for whose benefit the action is brought. No action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed after objection for ratification of commencement of the action by, or joinder or substitution of, the real party in interest; and such ratification, joinder, or substitution shall have the same effect as if the action had been commenced in the name of the real party in interest.

(emphasis added).

The purpose of § 2017(A) was explained in Weeks v. Cessna Aircraft Co., 1994 OK CIV APP 171, 895 P.2d 731, 733 (Approved for Publication by Order of Supreme Court), where the following is found:

Substitution of plaintiffs has been liberally granted in Oklahoma where mistake or inadvertent error has caused the improper party to file an action. Saint Paul Fire and Marine Insurance Co. v. Spann, 355 P.2d 567 (Okla.1960). In Saint Paul Fire, the court explained that " 'courts should be inclined to disregard subtleties and answer technical objections to the sufficiency of a pleading in an honest effort to determine the real issues on their merits, and to try and do substantial justice to the litigants before them.' " Id. at 570 (quoting Mostenbocker v. Shawnee Gas & Elec. Co., 49 Okla. 304, 152 P. 82, 85 (1915)). Furthermore, " 'where there is no change in the cause of action and the party substituted bears some relation of interest to the original party and to the action, the substitution may be allowed, as where the substitution is of one having the legal right to sue instead of one improperly named as plaintiff.' " Id. at 571 (quoting Dierks v. Walsh, 196 Okla. 372, 165 P.2d 354 (1946)).

Oklahoma's interpretation of section 2017 is fully consistent with the construction commonly placed on Federal Rule of Civil Procedure 17, from which section 2017 derives. The advisory committee notes to the 1966 amendment to Rule 17 describe the rationale for permitting liberal substitution of the plaintiff for the real party in interest in actions brought under the Federal Rules.

The provision that no action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed, after the objection has been raised, for ratification, substitution, etc., is added simply in the interests of justice. (Emphasis added).

F.R.C.P. 17, Advisory Committee Notes, 1966 Amendment. The committee notes stress that the provision "is intended to prevent forfeiture when determination of the proper party to sue is difficult or when an understandable mistake has been made." Id. The committee explains that "the modern function of the rule in its negative aspect is simply to protect the defendant against a subsequent action by the party actually entitled to recover." Id. Where the defendant's interests are protected, substitution should be allowed.

Thus, the purpose of the real party in interest requirement from the defendant's perspective is to insure that the defendant will not be later subjected to a second suit based on the same cause or claim. See Joplin v. Ely, 1961 OK 244, 365 P.2d 735, 736 (referring to predecessor real party in interest statute to § 2017); see also Watford v. West, 2003 OK 84, 78 P.3d 946. In other words, from a defendant's perspective the real party in interest requirement is to protect the defendant from a multiplicity of suits based on the same claim or claims.

17 Here, in essence, Associated persuaded the trial court that Office Design was the party having the actual right to recover (if entitlement to recovery was ultimately shown at all), not Boston, and the real party in interest purpose from Associated's perspective was served. When Office Design was allowed to intervene in the lawsuit, Office Design was, in effect, substituted in the place of Boston to litigate the same action and claims against Associated as had been initially brought by Boston. Although the "summary judgment" order of the trial judge handling the case prior to the judge that ruled on Associated's motion for attorney fees and costs used the unfortunate language that Boston's causes of action against Associated were dismissed with prejudice on the basis that Boston was not the real party in interest, the substantive effect of the "summary judgment" ruling was that Boston was dismissed as a party to the lawsuit and Office Design, once it decided to file a Second Amended Petition asserting the same claims, was substituted for Boston as the real party in interest plaintiff to carry forward the same action and the same claims as initially brought against Associated by Boston.

18 By virtue of the last phrase of § 2017(A) the substitution of Office Design had "the same effect as if the action had been commenced in the name of the real party in interest." Normally, § 2017(A)'s general purpose from the plaintiff's perspective, "is to prevent forfeiture when determination of the proper party to sue is difficult or when an understandable mistake has been made. Thus its main thrust is to allow correction in parties after the statute of limitation has run, despite the valid objection that the original action was not brought by the real party in interest." Watford, 2003 OK 84, 11, 78 P.3d at 949 (quoting 3A Moore's Federal Practice P, 17.15-1, at 17-182 (2nd ed. 1979))(emphasis deleted). Although no statute of limitation issue is involved in this case, the plain words of § 2017(A) are that a substitution, as practically occurred here, had the effect of placing Office Design in the shoes of Boston and it was as if the action initiated by Boston had, in fact, instead been initiated by Office Design. Therefore, the "summary judgment" ruling on the real party in interest issue, of course, did not bring an end to the litigation as a whole nor did it conclude the action or claims brought against Associated that were the subject of its Offer.

19 In the case of Triad Bank, N.A. v. A & A Materials Co., Inc., 2002 OK CIV APP 3, 39 P.3d 820, the COCA, Division III (the same division that reversed the trial court order involved here) basically recognized that an essential element or condition precedent to recovery of attorney fees and costs under § 1101.1(B) was an adjudication of the claim that was the subject of the offer of judgment. See Triad Bank, N.A., 2002 OK CIV APP 3, 5, 39 P.3d at 822. Without such an adjudication no determination can be made as to whether there was a judgment less than the offer. See id. Although Triad Bank, N.A. involved an unaccepted offer of judgment in regard to a counterclaim and, of course, did not involve a real party in interest substitution like the instant case, the principle espoused therein is applicable here. In the instant case the claims that were the subject of the offer of judgment were dismissed without prejudice when Office Design (purportedly joined by Boston) dismissed the action without prejudice prior to and without an actual adjudication of the claims. Thus, a required condition to application of § 1101.1(B)(3) is missing, i.e., a judgment actually adjudicating the action or claim or claims that were the subject of Associated's Offer. We reject Associated's argument that the real party in interest "summary judgment" ruling was an adjudication of the claim or claims asserted by Boston sufficient to invoke the provisions of § 1101.1. The simple fact is that the ruling on the real party in interest defense raised by Associated did not end the lawsuit nor did it render an ultimate determination as to Associated's liability on the claims asserted against it, as was recognized by the trial court in denying Associated's motion for attorney fees and costs.11

20 For us to rule here that the "summary judgment" ruling on the real party in interest issue was a judgment within the legislative contemplation of § 1101.1(B)(3) would be an act of stretching that provision beyond its limits with no basis but unwarranted and improper judicial fiat. It would involve a broad, rather than strict application of the provision, and, thus, would be a ruling contrary to our generally recognized jurisprudence in regard to the interpretation of attorney fee statutes. This we will not do. We finally note we have, of course, reviewed the entirety of § 1101.1 and find nothing therein to alter our view as to the correctness of the trial court's decision to deny Associated attorney fees and costs against Boston under that provision or to convince us that the Legislature intended for § 1101.1(B)(3) to apply in the situation or circumstances shown by the record presented to us in this case.

CONCLUSION

21 For the purposes of the recovery of attorney fees and costs under § 1101.1(B)(3), the "summary judgment" ruling of the trial court on the real party in interest issue cannot be considered an actual adjudication of the action or the claim or claims brought by Boston against Associated. Instead, the action and the claims were allowed to go forward and to continue through Office Design's intervention and, in effect, its substitution for Boston as the real party in interest to litigate the action and claims against Associated. Office Design dismissed the action without prejudice and, thus, neither the action or claims have to this point been the subject of a final and actual adjudication sufficient to invoke the provisions of § 1101.1(B)(3). In that no judgment has yet adjudicated the action or claim or claims that were the subject of Associated's Offer of Judgment, the trial court was correct to deny Associated's motion for attorney fees and costs and the COCA erred in reversing that order and remanding for a determination of attorney fees to Associated.

22 For the reasons set forth in this opinion, the COCA's opinion is VACATED and the trial court Order denying Associated's motion for attorney fees and costs against Boston is AFFIRMED.

Outcome: ¶22 For the reasons set forth in this opinion, the COCA's opinion is VACATED and the trial court Order denying Associated's motion for attorney fees and costs against Boston is AFFIRMED.

Plaintiff's Experts: Unknown

Defendant's Experts: Unknown

Comments: None