Wright v. DAVE JOHNSON INS. INC.
167 Wash. App. 758
Wash. Ct. App.2012Background
- David Johnson hired his son-in-law Wright to help run Dave Johnson Insurance, Inc.; their relationship soured and Wright left with Johnson's personal life insurance policies intended to fund a buy-sell arrangement.
- The 2001 buy-sell agreement provided Wright a right of first refusal funded by life insurance, and stated the agreement would be void if Wright ceased employment; no explicit transfer of policies was described in writing.
- Johnson transferred two $100,000 policies to Wright contemporaneously with the buy-sell agreement, claiming the transfer funded the buy-sell and was not a gift; Wright claimed the policies were a gift.
- Following Wright’s resignation in 2005, Johnson sued to recover the policies; Wright counterclaimed for damages, alleging fraud and promised compensation that Johnson allegedly owed him.
- The trial court ordered Wright to return the policies to Johnson and to reimburse Wright for premiums paid, and awarded Johnson fees and costs for Wright’s frivolous defenses.
- The Court of Appeals affirmed the return of the policies, held the interest rate on reimbursement was misapplied, and remanded for 12% prejudgment interest; it also narrowed fee awards to statutory costs and fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Wright must return the policies to Johnson | Wright argues no return obligation exists in the written agreements. | Johnson contends the policies were transferred to fund the buy-sell and therefore belong to Johnson upon Wright’s departure. | Yes; Wright must return policies to Johnson. |
| Whether Johnson must reimburse Wright’s premiums at the correct interest rate | Interest should be based on the rate applicable to the premiums Wright paid. | A blended or reduced rate is appropriate and fair. | No; the correct rate is 12% prejudgment interest. |
| Whether equitable constructive trust justified the relief | Constructive trust could unjustly enrich Wright if he keeps the policies. | No, the agreement controls, and the transfer was not a gift. | Constructive trust principles supported the return of policies and reimbursement of premiums. |
| Whether Johnsons are prevailing party eligible for fees under RCW 4.84.330 and 4.84.185 | Johnson should recover attorney fees as prevailing party under contractual or equitable grounds. | Because relief was equitable, not purely contract-based, only statutory fees/costs apply and RCW 4.84.185 may not apply if the action isn’t frivolous. | Johnsons are prevailing party but limited to statutory costs/fees; RCW 4.84.185 was not sustain-able for a wholly frivolous action. |
Key Cases Cited
- Hearst Commc'ns Inc. v. Seattle Times Co., 154 Wash.2d 493 (2005) (objective contract interpretation; parol evidence bars adding terms not in writing)
- Oliver v. Flow Intern. Corp., 137 Wash.App. 655 (2006) (parol evidence limitations; no adding to written contract terms)
- Barber v. Rochester, 52 Wash.2d 691 (1958) (partial integration; extrinsic evidence may show entire agreement inclusions)
- R.J. Reynolds Tobacco Co. v. State, 151 Wash.App. 775 (2009) (employs objective interpretation with extrinsic evidence limited to specific terms)
- Baker v. Leonard, 120 Wash.2d 538 (1993) (constructive trusts require equitable base; intent evidence necessary)
- Kausky v. Kosten, 27 Wash.2d 721 (1947) (oral agreements may create constructive trusts; express trusts must be in writing)
- Schrom v. Bd. For Volunteer Fire Fighters, 153 Wash.2d 19 (2004) (12% prejudgment interest when no rate agreed; statutory rate applies)
- Marassi v. Lau, 71 Wash.App. 912 (1993) (proportionality approach for multiple claims prevailing party analysis)