Sherwood Development Corp. v. McCormick, No. S1519-04 CnC (Norton,
J., June 6, 2005)

[The text of this Vermont trial court opinion is unofficial. It has been
reformatted from the original. The accuracy of the text and the
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STATE OF VERMONT                                      SUPERIOR COURT
Chittenden County, ss.:                           Docket No. S1519-04 CnC



SHERWOOD DEVELOPMENT CORP.

v.

McCORMICK



                                  ENTRY

       Following the dismissal of an action to enforce a purchase and sale
agreement against him, defendant seeks attorneys fees and costs under a
provision of the same contract. Although defendant raised several
defenses, the case was ultimately dismissed for plaintiff’s failure to comply
with another contract provision requiring pre-suit mediation. According to
the entry order, the court dismissed the case “so parties can comply with
mediation.” Sherwood Development Corp. v. McCormick, No. S1519-04
CnC (Norton, J., Mar. 22, 2005).

         The traditional “American Rule” for attorneys’ fees requires parties
to pay their own, regardless of who prevails. DJ Painting, Inc. v. Baraw
Enters., Inc., 172 Vt. 239, 246 (2001). Parties may contract to the contrary
and include attorney fee provisions in their agreements, id., but as a
derogation of the common law, these provisions must be interpreted
strictly. Bruntaeger v. Zeller, 147 Vt. 247, 255 (1986). Here defendant
seeks to enforce paragraph 20 (“Default”) of the alleged purchase and sale
agreement, which states, “In the event legal action is instituted arising out
of a breach of this Contract, the prevailing party shall be entitled to
reasonable attorneys’ fees and court costs.”

       It is well-established that a dismissal without prejudice is a “final
determination of the rights of the parties” for the purpose of determining a
prevailing party for attorneys’ fee provisions. E.g., Sackett v. Mitchell, 505
P.2d 1136, 1137 (Or. 1973); cf. V.R.C.P. 54(a); Morrissette v. Morrissette,
143 Vt. 52, 58 (1983). It is equally well-established that a party may claim
attorney fee provisions even when the other party voluntarily dismisses its
cause of action. E.g., Survivors of Iida v. Oriental Imports, Inc., 935 P.2d
105, 119–20 (Haw. 1997); Hatch v. Dance, 464 So.2d 713, 714 (Fla. App.
1985); see generally Anot., Dismissal of Plaintiff’s Action as Entitling
Defendant to Recover Attorneys’ Fees or Costs as “Prevailing Party” or
“Successful Party,” 66 A.L.R. 3d 1087 (1975, 2004 Supp.).

        While the present case is not a voluntary dismissal, the reasoning
from these cases is applicable. By allowing attorneys’ fees, even when the
plaintiff voluntarily dismissed her claim, courts have consistently
interpreted the term “prevailing party” to encompass a wide range of
situations, regardless of whether the case resolved on its merits or on a
technicality. This reasoning appears to be a mixture of contract
interpretation—the lack of any limiting or qualifying language on the term
“prevailing”—and policy. As to the latter, the Hawai’i Supreme Court
described some of its reasons while broadly interpreting a statutory
provision for attorneys’ fees:

       Holding employers liable for the costs of defending conceded
       issues or entire claims under the provisions of HRS § 386-93(b)
       certainly discourages weak appeals. It also reinforces the intent of
       the legislature by placing the burden of paying for unsuccessful
       appeals where it belongs—on the party with the poorly thought
       out, hastily conceived appeal, who can more readily absorb the
       costs of the appeal. It will also discourage vexatious litigation and
       the use of discovery, depositions, motions, and appearances to
       either harass employees or extract unnecessary expenditures from a
       party already facing dire financial straits.

Survivors of Iida, 935 P.2d at 120 (citations omitted). Though the exact
same policy reasons cannot necessary be assigned to the present purchase
and sale contract (a standardized form used in many real estate
transactions), it is safe to presume that similar considerations went into its
drafting. For example, the most obvious feature of any attorneys’ fee
provision is to discourage rash litigation—a policy which is also promoted
by the present contract’s mediation provision.

        Applying such reasoning and policies to the present case, there is no
reason not to award defendant attorneys’ fees under paragraph 20 of the
alleged contract. Plaintiffs originally filed this action for breach under the
terms of the agreement. The court dismissed these claim for a technical
failure to comply with the mediation provision. This was based on an
argument that the defendant raised and actively pursued in this litigation.
He has incurred legitimate expenses to answer the plaintiffs’ claims. The
language of the contract does not condition its award of fees and costs on
the manner or standard by which a party prevails. The fact that the case
was dismissed for failure to mediate, rather than decided later on the merits,
does not lessen the defendants’ prevailing status. Like the voluntary
dismissal, defendant has prevailed in obtaining a favorable judgment and
ending the present litigation. He is therefore entitled to reasonable fees and
costs.

        Based on the foregoing, defendant’s motion for costs and attorneys’
fees is granted.

       Dated at Burlington, Vermont________________, 2005.



                                               ________________________
                                                                  Judge
