Opinion:Wiggin Properties v. ARCO Building, 2022 OK CIV APP 13
Subject Matter:Contractual Fees
Date Decided:June 15, 2021. Mandate Issued April 27, 2022
Trial Court:District Court of Tulsa County
Route to this Court:ARCO Building appeals the denial of its request for fees from Wiggins Properties and the award of fees to James F. Hawkins, Jr.
Facts:Hawkins and ARCO were involved in a previously failed deal to purchase the ARCO building and convert it into condominiums, which dissolved in in 2011 and resulted in a lawsuit between the parties (First Agreement). ARCO vowed to never do business with Mr. Hawkins again and made it known to him. Mr. Hawkins and Wiggin Properties (WP) entered into a joint venture to purchase the ARCO Building in 2012 in which Mr. Hawkins did not reveal his involvement to ARCO (Second Agreement). WP and ARCO executed a sale of agreement in 2012 which would close in November of that year. In the time between the execution of the Second Agreement, ARCO and Mr. Hawkins reached a settlement of the 2011 dispute (Hawkins Settlement) over the First Agreement. After the settlement, Mr. Hawkins made it known to ARCO he was involved in the Second Agreement, to which ARCO refused to consummate the Second Agreement. WP filed suit against ARCO seeking declaratory judgment, damages for breach, and an order for specific performance. ARCO counterclaimed alleging improper anticipatory repudiation, civil conspiracy, fraud, and sought to rescind the Second Agreement. ARCO sued Mr. Hawkins for fraud and conspiracy and sought to rescind the Hawkins Settlement.

In 2015, the district court denied WP’s motion for summary judgment, dismissed ARCO’s claim for actual fraud against Mr. Hawkins, limited ARCO’s claim for constructive fraud to fraudulent inducement, and limited WP’s damages to specific performance of the Second Agreement. The remaining claims were tried in 2017 in which the district court found that ARCO had not proven actual fraud in the inducement by WP, the Second Agreement should be rescinded because of WP’s fraudulent inducement, WP was not entitled to specific performance because of “unclean hands” for failing to disclose Mr. Hawkins’ involvement, and in favor of Mr. Hawkins in ARCO’s claim against him.

ARCO and Mr. Hawkins filed fee applications with the court. The trial court denied ARCO because the Second Agreement had been rescinded and grounds for its application did not exist and it ruled in favor of Mr. Hawkins’ fee application. ARCO appealed.
Standard of Review:The standard of review for considering the district court’s award is an abuse of discretion. Hess v. Volkswagen of Am., Inc., 2014 OK 111, ¶ 9. An abuse of discretion review standard includes an appellate examination of both fact and law issues; an abuse occurs when a court bases its ruling on an erroneous legal conclusion or there is no rational basis in the evidence for the decision. Christian v. Gray, 2003 OK 10, ¶ 43. The standard of review for the legal interpretations of issues involving contractual fees is de novo. State ex rel. Prot. Health Servs. State Dep’t of Health v. Vaughn, 2009 OK 61, ¶ 9.
AnalysisOn ARCO’s claim for contractual fees, “Recission requires restoration of status quo and means to restore the parties to their former position.” Richardson v. Mustang Fuel Corp., 1989 OK 53, ¶ 11. The requirement is that both parties be returned to the status quo, therefore, without fees, WP would not be in the same position as it was before the contract either. Thus, one party could not be returned to the status quo at the expense of another. Oklahoma law has no specific case on this point, so the Court predicted that Oklahoma law would say that a rescinded contract is extinguished, and a fee clause within the rescinded contract has no weight.

ARCO’s claim for rescinding the prior Hawkins Settlement created the contractual basis for Mr. Hawkins’ fee request. The Court determined that an attempt to overturn the Hawkins Settlement was a clear attempt to reinstate those claims, which is as if ARCO had re-filed claims forcing Mr. Hawkins to defend the settlement, thus breaching the settlement. ARCO’s fraud claim was intertwined with WP’s claim for ARCO’s specific performance, ARCO’s claim that WP wasn’t entitled to specific performance, ARCO’s “unclean hands” defense against specific performance, ARCO’s claim of Hawkins and WP’s fraud and their conspiracy, and ARCO’s claim to rescind the Hawkins Settlement. The Court determined that Hawkins was therefore only entitled to fees from the litigation costs of defending himself with matters related to the settlement, and not in WP’s defense for the Second Settlement claims. In apportioning the fees according to this segregation, the Court remanded for further proceedings on apportionment because the burden is on the moving party to show why it is entitled to fees. Curry v. Streater, 2009 OK 5, ¶ 19.

Regarding the other matters, the Court found WP and Mr. Hawkins committed constructive fraud in the Second Agreement, therefore ARCO was entitled to recission of the Second Agreement but was not entitled to rescission of the Hawkins Settlement. Because Hawkins and WP had “unclean hands,” ARCO received equitable relief of the agreement’s cancellation, but cancelling the settlement and its attendant fees would be a contractual matter, thus, ARCO was not entitled to recission of the settlement. In conclusion, a party cannot claim prevailing fees from a rescinded contract, and specific apportioned costs go to the court with sufficient evidence because that determination is fact specific.
Outcome:Affirmed in Part, Reversed in Part, and Remanded for Further Proceedings.
Vote:3-0. Rapp, J., Pemberton, J., and Barnes, J. (author) concur.