Red Letter Ministries, App/cross-resp v. City Of North Bend, Resp/cross-app ( 2015 )

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IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
RED LETTER MINISTRIES, an
unincorporated religious association, No. 71867-3-1
Appellant/ DIVISION ONE
Cross-Respondent,
v.
UNPUBLISHED OPINION
CITY OF NORTH BEND, an
incorporated Washington municipality, FILED: July 27, 2015
Respondent/
Cross-Appellant,
and
KENNETH G. HEARING, Mayor of
North Bend,
Defendant.
Becker, J. — Red Letter Ministries' action to enforce an alleged oral
agreement with the City of North Bend was notfiled by the real party in interest
as required by CR 17. We therefore affirm the superior court's dismissal of the
action on summary judgment. We also affirm the court's denial of the City's
request for attorney fees incurred in dissolving a preliminary injunction. But
because the court entered judgment on the City's counterclaims against a person
No. 71867-3-1/2
who was neither named as a party nor served, we vacate that portion of the
judgment.
In 2003, Salli DeBoer registered a nonprofit charitable corporation called
Network Services of Puget Sound. She changed the organization's name to Red
Letter Programs and Housing in 2010 after entering into the oral agreement that
is the subject of this appeal.
In 2008, the Washington State Attorney General filed a complaint against
Network Services of Puget Sound and DeBoer for violations of the Consumer
Protection Act, chapter 19.86 RCW, and the charitable solicitations act, chapter
19.09 RCW. The lawsuit resulted in a consent decree enjoining Network
Services of Puget Sound, DeBoer, and their successors, assigns, officers, and
agents from soliciting charitable donations without being registered as a
charitable organization and from misrepresenting the use of any collected
donations.
In June 2010, the mayor of the City of North Bend allegedly offered
DeBoer and Network Services of Puget Sound a house for use as a homeless
shelter in exchange for one dollar. The mayor also offered a one dollar per year
ground lease on a city parcel. The parties dispute whether the terms of the
agreement included a condition that Network Services of Puget Sound move the
house to the parcel at its own expense within three weeks, subsequent approval
of a written contract by the North Bend City Council, or certain conditions relating
to the use and condition of the house.
No. 71867-3-1/3
Network Services of Puget Sound subsequently moved the house,
allegedly spending over $14,000. Shortly thereafter, Network Services of Puget
Sound attempted to memorialize the alleged oral agreement. According to the
City, the city council authorized the mayor to sign written contracts, including a
provision requiring Network Services of Puget Sound to use the house only for its
family services program. Network Services of Puget Sound declined to sign and
instead proposed to use a portion of the house and ground lease for
administrative purposes associated with the family services program. It also
allegedly deleted a term prohibiting use of the house for "other business
purposes." Appellant Red Letter Ministries, on the other hand, claims it was the
City that attempted to insert new terms into the original agreement.
Appellant Red Letter Ministries came into being on January 1, 2012, when
DeBoer opened an account with the Department of Revenue for an "association"
with that name. DeBoer did not register Red Letter Ministries to solicit charitable
contributions.
On January 12, 2012, DeBoer dissolved Red Letter Programs and
Housing (formerly Network Services of Puget Sound). Nothing in the dissolution
filings purported to transfer any assets to Red Letter Ministries.
In February 2012, the city council rejected the proposed contracts
memorializing the oral agreement and voted to demolish the house.
Six months later, Red Letter Ministries (hereafter "Red Letter") filed a
"Complaint for Temporary Restraining Order, Preliminary Injunction, and Specific
No. 71867-3-1/4
Performance" against the City and its mayor. The complaint alleged that the City
had executed an oral contract with Red Letter for the above-mentioned house
and ground lease, and that Red Letter partly performed by moving the house at a
cost of over $14,000. Red Letter asserted claims for promissory estoppel and
breach of contract. It requested all "applicable remedies including, but not limited
to, injunctive relief" and specific performance, attorney fees, and such "other and
further relief as the Court may deem just and appropriate."
In a supporting declaration, Salli DeBoer alleged that she was the
president of Red Letter, that Red Letter was formerly known as Network Services
of Puget Sound "but changed its name on January 1, 2012." This was legally
incorrect. Network Services of Puget Sound had previously changed its name to
Red Letter Programs and Housing. On January 1, 2012, Red Letter Programs
and Housing dissolved; it did not change its name to Red Letter Ministries.
Rather, DeBoer created Red Letter Ministries on January 12, 2012. Red Letter
Ministries has no legal connection to Network Services of Puget Sound or to Red
Letter Programs and Housing.
The City answered the complaint and asserted several defenses, including
the absence of a valid contract, the statute of frauds, and ultra vires actions by
the mayor. The City counterclaimed for promissory estoppel, negligent
misrepresentation, breach of contract and nuisance abatement. The
counterclaims alleged in part that the house had not been made ready for
occupancy within a reasonable period oftime and was in violation of numerous
No. 71867-3-1/5
provisions of the city code and state law. The City conceded that it had approved
versions of a purchase and sale agreement and ground lease in September,
2010, but alleged that Red Letter responded with a "materially different
counteroffer, which would have allowed Red Letter to use the house as office
space." The City alleged it rejected the counteroffer and advised Red Letter that
it must sign the contracts or the City would demolish the house.
In August 2012, the City moved to dismiss the complaint under CR
12(b)(6). The City argued in part that the acts of the mayor were ultra vires and
that any oral contract violated the statute offrauds. The court denied the motion.
On September 4, 2012, the superior court granted Red Letter a
preliminary injunction, stating in part:
plaintiff has demonstrated a clear legal and equitable right, and the
likelihood of prevailing, on at least a portion of its claim. The North
Bend municipal code authorizes the mayor, without further action
by the city council, to enter in to contracts under $7500 for
"materials, equipment, supplies and services". The oral contract
here (which was clearly supported by consideration, part
performance and reliance in the form of almost $14,000 in moving
costs, and which is not subject to the Statute of Frauds for multiple
reasons) consisted of 3 parts: (1) the sale of a house; (2) moving
the house; and (3) annual $1 lease for 5 years. While it is difficult
to characterize a lease as a contract for "services", the mayor was
clearly authorized to sell the house to plaintiff and to have plaintiff
move it: as such, not all of the mayor's actions and promises can
fairly be characterized as ultra vires. While the amount of
damages, the interplay between those actions which the mayor was
authorized to undertake and those which were ultra vires and the
enforceability and terms of the alleged lease promises are not
clear, plaintiff has established a likelihood of prevailing on at least
some of its claims and has established the likelihood of some
money damages against North Bend at trial.
No. 71867-3-1/6
In July 2013, the City filed the first of two motions for summary judgment.
The City argued, among other things, that the oral agreement violated the statute
of frauds and was ultra vires. The court granted the motion in part, dismissing
Red Letter's claims for enforcement of the written contracts and promissory
estoppel. The court denied summary judgment on the alleged oral agreement,
stating in part:
genuine issues of material fact exist over apparent authority, part
performance and consideration in plaintiff's effort to enforce the
verbal agreement between the Mayor and Ms. DeBoer. Even if the
Court does not view the evidence in the light most favorable to the
non-moving party (as it is required to do here), the Court cannot
fairly characterize plaintiff's proposed additional lease language as
a repudiation or true counter-proposal of the oral agreement.
Although North Bend officials had internal concerns that the
building would be used solely for Red Letter's administrative
offices, there is no evidence in the record that Red Letter ever
intended to use the building for that purpose alone and plaintiff's
additional proposed language was not inconsistent with the oral
promises between the Mayor and Ms. DeBoer. Nowhere in that
oral promise did the Mayor or Ms. DeBoer prohibit part use of the
property for administrative purposes, and the promise can be
construed much more broadly than housing alone for homeless
families.
In February 2014, the City filed a second motion for summary judgment,
this time arguing that Red Letter was not the real party in interest because it did
not exist at the time of the alleged oral agreement and was not a successor to
Network Services and Red Letter Programs and Housing.
Red Letter immediately moved to substitute or join Red Letter Programs
and Housing. The motion alleged that the oral contract was between the mayor
and Network Services of Puget Sound and that Red Letter Programs and
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Housing was the successor to Network Services of Puget Sound. In an attached
declaration, DeBoer alleged that although Red Letter Programs and Housing
dissolved on January 12, 2012, its assets were transferred to Red letter, that Red
Letter "assumed" this transfer included the rights under the oral contract with the
City, and that the failure to name Red Letter Programs and Housing as a plaintiff
in this action "was the result of an honest mistake." The City countered that Red
Letter Programs and Housing could not be joined because it no longer existed,
that itwas statutorily time barred from participating in postdissolution legal
proceedings in any event, and that nothing supported Red Letter's assumption
that the rights under the oral agreement had been transferred to it from Red
Letter Programs and Housing.
The court requested and received supplemental briefing on the ability of
Red Letter Programs and Housing to transfer assets after its dissolution. The
City argued that Red Letter Programs and Housing was required by statute to
transfer any assets prior to its dissolution, that it had failed to do so, and that no
authority existed to transfer its assets postdissolution. Red Letter conceded that
Red Letter Programs and Housing did not transfer its assets prior to dissolution
but blamed that omission on the dissolution form provided by the Secretary of
State. Red Letter argued that it could not "be faulted for not addressing that
issue" when the Secretary of State's form itselffailed to address it. Red Letter
also argued that no statute expressly prohibited a postdissolution asset transfer.
No. 71867-3-1/8
On April 3, 2014, the court entered orders denying Red Letter's motion to
join Red Letter Programs and Housing and granting the City's second motion for
summary judgment. The court dissolved Red Letter's preliminary injunction,
dismissed all of Red Letter's claims with prejudice, and entered judgment
"against Salli DeBoer individually and Red Letter Ministries on the City's
counterclaims for breach of contract and misrepresentation." Red Letter appeals
the order on summary judgment.
On April 10, 2014, the City requested $114,282 in attorney fees it
allegedly incurred in dissolving the preliminary injunction. Red Letter opposed
the request, arguing that fees could not be awarded "where a trial on the merits
to obtain specific performance would have been fruitless" if Red Letter had not
obtained the preliminary injunction. Red Letter reasoned that a trial would have
been fruitless absent an injunction because Red Letter sought specific
performance and did not "seek or allege monetary damages against the City."
On April 16, 2014, the court denied the City's request for fees and costs.
The City cross appeals from that order and from the superior court's August 2013
order denying the City's first motion for summary judgment.
DECISION
Preliminarily, the City contends Red Letter's appeal is moot because Red
Letter only sought specific performance below, did not file a supersedeas bond,
and can no longer obtain specific performance because the City has demolished
the house. Red Letter claims the appeal is not moot because its complaint
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No. 71867-3-1/9
included language supporting other relief, including damages. Specifically, it
points to its request for "all applicable remedies including, but not limited to,
injunctive relief and "such other and further relief as the Court may deem just
and appropriate." There is authority supporting Red Letter's position. See Hos
Bros. Bulldozing. Inc. v. Hugh S. Ferguson Co., 8 Wn. App. 769, 773, 508 P.2d
1377 (1973); Zastrow v. W.G. Platts. Inc.. 57 Wn.2d 347, 350, 357 P.2d 162, 360
P.2d 354 (1960). We note, however, that Red Letter took a different position
below.
When the City requested attorney fees for dissolving the injunction, Red
Letter opposed the motion on the ground that an injunction was necessary
because Red Letter requested specific performance but did not"seek or allege
monetary damages against the City." Arguably, Red Letter's position below
estops it from taking a different position in this court. See Anfinson v. FedEx
Ground Package Svs., Inc., 159 Wn. App. 35, 61, 244 P.3d 32 (2010) (judicial
estoppel is an equitable doctrine that precludes a party from asserting one
position in court proceedings and later seeking an advantage by taking a clearly
inconsistent position), affirmed, 174Wn.2d 851, 281 P.3d 289 (2012). The City,
however, has not made that argument. In addition, Red Letter seeks other relief
on appeal in the form of reversal of the judgment against Salli DeBoer.
Accordingly, the appeal is not moot.
No. 71867-3-1/10
Summary Judgment
Red Letter contends the superior court erred in dismissing its claims
against the City on summary judgment. Summary judgment is appropriate if
there is no genuine issue of material fact and the moving party is entitled to a
judgment as a matter of law. CR 56(c). When reviewing an order for summary
judgment, we engage in the same inquiry as the trial court. New Cingular
Wireless PCS. LLC v. City of Clyde Hill Wn. App. 349 P.3d 53 (2015).
Red Letter argues that summary judgment was improper because there
were genuine issues offact as to the validity of the oral contract and the
application of the statute offrauds. The City counters, as it did below, that even
if an enforceable oral contract existed, Red Letter could not enforce it because
Red Letter was not the real party in interest. We agree with the City.
Under CR 17(a), every action "shall be prosecuted in the name ofthe real
party in interest." Our courts have held that the real party in interest "is the
person who possesses the right sought to be enforced." Spraoue v. Svsco
Corp.. 97 Wn. App. 169, 176 n.2, 982 P.2d 1202 (1999), review denied, 140
Wn.2d 1004 (2000). The City correctly points out that Red Letter was neither a
party to the contract, a third party beneficiary, nor a legal successor to one of the
contracting parties' rights. It concludes that Red Letter was notthe real party in
interest. Authority supports that conclusion. Kim v. Moffett, 156 Wn. App. 689,
698-701, 234 P.3d 279 (2010) (original owner, as party to agreement, could sue
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No. 71867-3-1/11
for breach of it, but successor owner who was not an intended beneficiary of the
agreement and did not exist when it was formed could not).
Despite the City's thorough briefing on this issue both below and on
appeal, and despite the superior court's focus on the issue immediately prior to
granting summary judgment, Red Letter devotes just three conclusory sentences
to the topic in its reply brief.
The facts alleged by the non-moving party ... is that DeBoer
accepted the [City's] offer on behalf of RLM. This inference is
reasonable, because the lawsuit was brought by RLM in RLM's
name, and all counterclaims were leveled at RLM. RLM is
therefore the real party in interest for purposes of summary
judgment.
This conclusory response is not supported by authority or meaningful analysis
and is thus insufficient to carry Red Letter's burden on appeal. Cowiche Canyon
Conservancy v. Boslev. 118 Wn.2d 801, 809, 828 P.2d 549 (1992) (arguments
not supported by authority or analysis need not be considered); State v. Elliott.
114 Wn.2d 6, 15, 785 P.2d 440 (appellate court need not consider claims that
are insufficiently argued), cert, denied, 498 U.S. 838 (1990); State v. Rafav, 168
Wn. App. 734, 843, 285 P.3d 83 (2012) (rejecting claim due to absence of
meaningful argument or authority to support conclusory claim), review denied,
176Wn.2d 1023 (2013), cert, denied, 134 S. Ct. 170(2013).
Red Letter's response also misrepresents the record. DeBoer did not
accept the City's offer on behalf of Red Letter Ministries. Rather, she stated in
her declaration below that she entered into the agreement on behalf of Network
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No. 71867-3-1/12
Services of Puget Sound. The minutes of the July 20, 2010, North Bend City
Council meeting and draft contracts from September 2010 all repeatedly refer to
a proposed agreement between the City and Network Services of Puget Sound,
not Red Letter. This is not surprising since Red Letter did not even exist until
many months after the alleged oral agreement.
Red Letter's response on appeal is also notable for what it does not
assert. Specifically, it does not assert that Red Letter is a legal successor to
Network Services of Puget Sound and Red Letter Programs and Housing or that
it is a recipient of their transferred assets. With regard to the latter, we note that
DeBoer's bald allegation below that the assets of Red Letter Programs and
Housing were transferred to Red Letter was too conclusory to preclude summary
judgment. See Grimwood v. Univ. of Puget Sound, Inc., 110 Wn.2d 355, 359-60,
753 P.2d 517 (1988) (unsupported conclusory assertions are insufficient to
defeat summary judgment); Greenhalgh v. Dep't of Corr., 160 Wn. App. 706,
714, 248 P.3d 150 (2011) ("Mere allegations, argumentative assertions,
conclusory statements, and speculation do not raise issues of material fact that
preclude a grant of summary judgment.").
Finally, the mere fact that the lawsuit and counterclaims name Red Letter
does not support a conclusion that Red Letter is the real party in interest.
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No. 71867-3-1/13
In short, Red Letter's arguments on the real party in interest issue are
insufficient and unpersuasive. Summary judgment was proper.
Our resolution of this issue makes it unnecessary to reach the City's cross
appeal from the order partially denying its first motion for summary judgment.
We note, however, that contrary to Red Letter's assertions, the City's appeal
from that order is timely and that Red Letter's failure to respond to the merits of
several of the City's arguments, including its argument that the agreement was
ultra vires, provides an additional basis to affirm the order granting summary
judgment.
Judgment Against Nonparty
Red Letter next contends the superior court erred in entering judgment
against Salli DeBoer for the City's counterclaims. Because DeBoer was never
named as a party or served, Red Letter concludes the court never obtained
jurisdiction over her and therefore erred in entering judgment against her. The
City responds that it "is entitled to collect judgment against DeBoer individually
because RLM is her sole proprietorship." We vacate the judgment against
DeBoer.
We note initially that while the court entered judgment "against Salli
DeBoer individually and Red Letter Ministries on the City's counterclaims for
breach of contract and misrepresentation," it appears the City did not seek, and
the court did not award, any damages on the counterclaims. Nevertheless, the
judgment against Salli DeBoer individually must be vacated. Proper service ofa
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No. 71867-3-1/14
summons and complaint is required to acquire personal jurisdiction over a party.
Allstate Ins. Co. v. Khani, 75 Wn. App. 317, 324, 877 P.2d 724 (1994). If a court
lacks personal jurisdiction over a party, a judgment entered by the court against
that party is void. Marlev v. Dep't of Labor &Indus., 125Wn.2d 533, 541, 886
P.2d 189 (1994). Here, it is undisputed that the City not only did not serve
DeBoer, but it failed to name or request judgment against her in its
counterclaims. The City cites no authority supporting its assertion that naming
and serving Red Letter was sufficient because Red Letter is an unincorporated
religious association and as such is nothing more than a sole proprietorship. The
law, in fact, appears to be to the contrary. Dolbv v. Worthy, 141 Wn. App. 813,
816-17, 173 P.3d 946 (2007) (stating that "to sue a sole proprietorship, one must
sue the individuals comprising the business" and serve them personally at their
usual place of abode), review denied, 164 Wn.2d 1004 (2008). The City also
fails to demonstrate any valid basis for applying equitable estoppel to Red
Letter's claim that the judgment against DeBoer is void. We vacate the judgment
against her.
Cross Appeal/Attorney Fees
The City appeals the court's denial of its request for $114,282 in attorney
fees and costs incurred in dissolving the preliminary injunction. Under Ino Ino,
Inc. v. Citv of Bellevue, 132 Wn.2d 103, 143, 937 P.2d 154, 943 P.2d 135814
No. 71867-3-1/15
(1997), cert, denied, 522 U.S. 1077 (1998), a court has discretion to award
attorney fees to a party that prevails in dissolving a wrongfully issued temporary
injunction. The purpose of this rule is to discourage parties from seeking
unnecessary injunctive relief prior to a trial on the merits. Cornell Pump Co. v.
Citv of Bellingham. 123 Wn. App. 226, 233, 98 P.3d 84 (2004). That purpose is
not served where injunctive relief is necessary to preserve the status quo
pending trial. Cornell, 123 Wn. App. at 233. A trial court abuses its discretion
only if its decision is manifestly unreasonable or based on untenable grounds.
Holbrook v. Weyerhaeuser Co., 118 Wn.2d 306, 315, 822 P.2d 271 (1992).
The City contends fees should have been awarded "given DeBoer's
knowingly deceptive and manipulative machinations," including "misleading the
Court about use of the house for an administrative office" and orchestrating a
"shell game of name changes to her various entities." Even assuming these
statements fairly characterize DeBoer's conduct, they do not demonstrate that
temporary injunctive relief was unnecessary to preserve the status quo or that
the court's decision was manifestly unreasonable.
Red Letter requests fees on appeal but fails to devote a section of its brief
to this request and fails to cite authority entitling it to fees. The request is
therefore denied. RAP 18.1; Wilson Court Ltd. P'ship v. Tony Maroni's, Inc.. 134
Wn.2d 692, 710 n.4, 952 P.2d 590 (1998).
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No. 71867-3-1/16
The orders granting summary judgment and denying attorney fees are
affirmed. The judgment against Salli DeBoer is vacated.
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WE CONCUR:
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