Paul N. Hagman v. Hmc Capital Investments ( 2015 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
PAUL N. and DEBORAH R. HAGMAN,
husband and wife, and RYAN P. HAGMAN,
as his separate estate, No. 71156-3-1
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Respondents, DIVISION ONE
WARREN C. WILLIAMS; JOHN L. SCOTT,
INC.; 10820 EVERGREEN LLC, d/b/a
MICHAEL HAGAN ESCROW; ROBERT T.
MAPLE,
Defendants, UNPUBLISHED OPINION
and FILED: June 15, 2015
HMC CAPITAL INVESTMENTS, INC.
d/b/a JOHN L. SCOTT SNOHOMISH;
BARBARA A. SHELTON; CHRISTOPHER
GOUGH; JOHN or JANE DOE, designated
broker of JOHN L. SCOTT SNOHOMISH;
Appellants.
Becker, J. —The prevailing party under a contractual fee-shifting
provision is generally entitled to an award of attorney fees only if the underlying
action involves claims "on the contract." Because Barbara Shelton failed to
demonstrate that the Hagmans' tort claims for fraud and negligent
misrepresentation were based on the parties' contract, the trial court did not err in
refusing to award Shelton attorney fees as the prevailing party following a
voluntary dismissal under CR 41. Nor has Shelton demonstrated that the trial
court abused its discretion in denying CR 11 sanctions. We affirm.
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FACTS
For purposes of this appeal, the relevant facts are not disputed. In 2010,
Paul, Deborah, and Ryan Hagman (Hagman) purchased an unimproved parcel of
property in Skagit County from Warren Williams. Barbara Shelton, the managing
real estate broker of HMC Capital Investments, Inc., d/b/a John L. Scott
Snohomish, represented the seller Williams. Her husband, Christopher Gough, a
real estate broker in the same office, represented Hagman. As part of the
transaction, Gough, on behalf of John L. Scott, and Hagman executed a Buyer's
Agency Agreement.
After the purchase, Hagman learned that he would not be able to obtain a
building permit for the property because it lacked access to an adequate water
supply. On April 25, 2012, Hagman filed this action against the seller, the real
estate brokers, and others associated with the transaction, seeking rescission of
the purchase and sale agreement and damages. Among other things, Hagman
alleged that the defendants
actually knew (had actual knowledge) or had reason to know that
the Lot 2 did not have a well to use or an adequate supply of water,
and intentionally, recklessly, and/or negligently concealed this
information from Plaintiffs and fraudulently induced the sale.
As to the real estate brokers, HMC, Shelton, and Gough (collectively Shelton),
Hagman's complaint alleged claims of fraud, negligent misrepresentation, and
violation of the Consumer Protection Act, chapter 19.86 RCW.
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On November 1, 2012, Shelton moved for summary judgment. On
December 3, 2012, the trial court concluded that genuine issues of material fact
remained and denied the motion. The court also denied Shelton's motion for
attorney fees and CR 11 sanctions.
On July 30, 2013, Hagman moved for a voluntary dismissal of all his
claims under CR 41(a)(1)(B). He explained that discovery revealed that his
preferred remedy of rescission was not possible. Hagman further asserted that
because there were no contract claims and that all claims against Shelton arose
out of statutory and common-law duties, the dismissal should be without an
award of costs or attorney fees.
Shelton did not oppose dismissal but maintained that she was the
prevailing party under the attorney fee provision in the Buyer's Agency
Agreement and therefore entitled to an award ofattorney fees and costs.
Shelton also asserted that she was entitled to attorney fees under CR 11
because Hagman was "unable to show that Shelton had done anything wrong."
Following oral argument on October 18, 2013, the trial court granted
Hagman's motion and dismissed the case without prejudice. The court declined
to award attorney fees but ruled that attorney fees and costs would be addressed
should Hagman "reinstitute any claims." Shelton appeals.
Hagman initially contends that the trial court's order is not appealable. But
Shelton has not sought review of the order granting voluntary dismissal without
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prejudice. Rather, she challenges the trial court's denial of an attorney fee
award. Courts have generally found such decisions appealable as a matter of
right. See Allahvari v. Carter Subaru. 78 Wash. App. 518, 521 n.2, 897 P.2d 413
(1995), abrogated on other grounds by Wachovia SBA Lending. Inc. v. Kraft. 165
Wash. 2d 481, 200 P.3d 683 (2009).
ANALYSIS
Shelton contends that the trial court erred in failing to award attorney fees
under paragraph 11 of the Buyer's Agency Agreement, which provided:
ATTORNEYS' FEES. In the event of suit concerning this
Agreement, including claims pursuant to the Washington Consumer
Protection Act, the prevailing party is entitled to court costs and a
reasonable attorney's fee.
She argues that because she was the prevailing party under this provision, the
trial court was obligated to award attorney fees. Shelton also contends that the
trial court erred in failing to award attorney fees under CR 11.
"Whether a party is entitled to attorney fees is an issue of law that we
review de novo." Little v. King. 147 Wash. App. 883, 890, 198 P.3d 525 (2008).
Shelton relies primarily on Singleton v. Frost. 108 Wash. 2d 723, 730, 742 P.2d
1224 (1987), which held that when RCW 4.84.330 applies, "the trial court has the
power to limit an award of attorney's fees to a reasonable sum; however, this
power does not extend to allow the complete denial of attorney's fees where the
contract provides for their award."
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Shelton concedes that the attorney fee provision in the Buyer's Agency
Agreement authorized an award "to the prevailing party in the event that a lawsuit
was commenced by either party for the enforcement of the contract." (Emphasis
added.) The prevailing party may recover under such a contractual fee-shifting
provision, however, only if the opposing party brings a claim "on the contract":
that is, only if a party seeks to recover under a specific contractual
provision. If a party alleges breach of a duty imposed by an
external source, such as a statute or the common law, the party
does not bring an action on the contract, even if the duty would not
exist in the absence of a contractual relationship.
Boguch v. LandoverCorp., 153 Wash. App. 595, 615, 224 P.3d 795 (2009) (citing
Hemenwav v. Miller. 116 Wash. 2d 725, 743, 807 P.2d 863 (1991); Burns v.
McClinton. 135 Wash. App. 285, 310-11, 143 P.3d 630 (2006). review denied. 161
Wash. 2d 1005 (2007); G.W. Constr. Corp. v. ProfI Serv. Indus.. Inc.. 70 Wash. App.
360, 366, 853 P.2d 484 (1993). review denied. 123 Wash. 2d 1002 (1994)).
An action is "'on the contract'" for purposes of a contractual attorney fees
provision if the action (1) "'arose out of the contract'" and (2) "'if the contract is
central to the dispute.'" Boguch. 153 Wash. App. at 615 (quoting Tradewell Group,
Inc. v. Mavis, 71 Wash. App. 120, 130, 857 P.2d 1053 (1993)). '"If the tortious
breach of a duty, rather than a breach of a contract, gives rise to the cause of
action, the claim is not properly characterized as breach of contract.'" Boguch,
153 Wash. App. at 616 (emphasis added) (quoting Owens v. Harrison. 120 Wn.
App. 909, 915, 86 P.3d 1266 (2004)).
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In resisting summary judgment, Hagman expressly alleged that Shelton
was liable for breaching common law and statutory duties. On appeal, Shelton
has not disputed or even addressed Hagman's specific arguments regarding
breach of common law and statutory duties. Nor has she made any showing that
Hagman's claims of fraud and negligent misrepresentation were based on her
violation of specific contractual provisions. Under the circumstances, Shelton
has not shown that Hagman's claims were "on the contract" or that the trial court
erred in failing to award contractual attorney fees for defending against
Hagman's tort claims. Cf. Boguch, 153 Wash. App. at 619 (because realtor's
common law and statutory duty to exercise reasonable care exists regardless of
any contractual provision, seller's negligence claims are not "on the contract").
Consequently, Frost does not apply to the facts here.
Shelton also contends that the trial court erred in refusing to award
attorney fees for Hagman's violation of CR 11. CR 11 requires that a party's
pleadings, motions, or legal memoranda be grounded in fact, warranted by
existing law, and not interposed for any improper purpose, such as to harass or
to cause unnecessary delay or needless increase in the cost of litigation. CR
11(a); see, e^ Blair v. GIM Corp., 88 Wash. App. 475, 482-83, 945 P.2d 1149
(1997). Because CR 11 sanctions have a potential chilling effect, the trial court
should impose sanctions only when it is patently clear that a claim has absolutely
no chance of success; the fact that a complaint does not prevail on its merits is
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not enough. Skimming v. Boxer. 119 Wash. App. 748, 755, 82 P.3d 707, review
denied, 152 Wash. 2d 1016 (2004). We review the trial court's decision to deny CR
11 sanctions for an abuse of discretion. Skimming. 119 Wash. App. at 754.
Shelton alleges that Hagman's lawsuit was not well grounded in fact or
warranted by existing law. But Shelton does not address the trial court's denial
of her summary judgment motion and motion for CR 11 sanctions. Rather, she
relies solely on conclusory allegations that she was contractually and statutorily
immune from any liability whatsoever. Because Shelton has not supported the
alleged error with any meaningful legal argument, references to the arguments
before the trial court, or citation to relevant authority, she has failed to
demonstrate that the trial court abused its discretion in refusing to impose CR 11
sanctions. Cf. Saunders v. Lloyd's of London, 113 Wash. 2d 330, 345, 779 P.2d
249 (1989) (appellate court will decline to consider issues unsupported by cogent
legal argument and citation to relevant authority).
Hagman requests attorney fees for responding to a frivolous appeal. See
RAP 18.9. An appeal is frivolous "ifthe appellate court is convinced that the
appeal presents no debatable issues upon which reasonable minds could differ
and is so lacking in merit that there is no possibility of reversal." In re Marriage of
Foley, 84 Wash. App. 839, 847, 930 P.2d 929 (1997). We resolve any doubts as to
whether an appeal is frivolous in the appellant's favor. Granville Condo.
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Homeowners Ass'n v. Kuehner, 177 Wash. App. 543, 558, 312 P.3d 702 (2013).
Applying this standard, we deny Hagman's request.
Affirmed.
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WE CONCUR:
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