Richard & Karen Applegate, Appellants/cross Resp. v. Wa Federal Savings, Resp/cross App.,et Al ( 2014 )

FILED
CO' _RI- OF
APPEALS
20111JUN24 9 : Q3
c
IN THE COURT OF APPEALS OF THE STATE OF WASHIN
2y
DIVISION II
RICHARD APPLEGATE and KAREN No. 43043 -6 -II
APPLEGATE, husband and wife,
Appellants /Cross -Respondents,
v.
WASHINGTON FEDERAL SAVINGS, a
Savings and Loan subsidiary of
WASHINGTON FEDERAL, INC., a
Washington Corporation;
Respondent/ Cross -Appellant,
HARBOR HOME DESIGN, INC., a
Washington Corporation; CHARLES
BUCHER and JANE DOE BUCHER,
husband and wife, and the marital
community comprised thereof;
Respondents,
KITSAP BANK, a Washington Financial
Institution; OHIO CASUALTY INSURANCE
CO., Bond No. 3620699; and AMERICAN UNPUBLISHED OPINION
INTERNATIONAL GROUP, INC.,
re Policy No. 06LX0093840897,
Defendants.
WoRSwICK, J. — Richard and Karen Applegate appeal from the trial court' s orders
following a jury verdict in favor of Washington Federal Savings ( WFS) and Harbor Home
Design ( HHD). The Applegates also challenge the trial trial
court' s pre - ruling granting summary
No. 43043 -6 -II
judgment to WFS on their claims for negligence and breach of fiduciary duty. WFS cross -
appeals, challenging the trial court' s denial of its attorney fees request.
The Applegates argue that the jury verdict was improper because ( 1) interrogatory 1 on
the WFS special verdict form confused the jury as to the Applegates' breach of contract claim
against WFS, ( 2) the trial court improperly excluded the Applegates' expert witness Robert
Floberg for a discovery violation, and ( 3) the trial court improperly excluded the Applegates' lay
witness Diana Behrens under ER 404( b). WFS argues that the trial court erroneously ruled that
the contract' s attorney fee provision did not apply to the defense of a breach of contract claim.
Because the jury instructions were proper, and because the trial court did not err in
excluding Floberg' s or Diana' s testimony, we affirm the jury verdict. Additionally, because the
jury established as a fact that HHD committed no wrongdoing related to its dealings with the
Applegates, we hold that whether the trial court erred in granting summary judgment on the
Applegates' negligence and breach of fiduciary duty claims is a moot issue. Finally, because the
custom construction loan contract' s attorney fee provision entitles WFS to attorney fees as the
prevailing party, we reverse the trial court' s denial of attorney fees to WFS and remand for an
award of attorney fees, limited to fees and costs incurred defending against the Applegates'
contract action.
FACTS
Richard and Karen Applegate sought to build a home. The Applegates took out a
550, 000 mortgage with WFS to finance the home' s construction and hired HHD to build it.
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Charles Bucher was the president and sole employee of HHD. 1 The Applegates signed a custom
construction loan contract with WFS and a residential construction contract with HHD.
A. The Applegates' Contract with WFS
1. Custom Construction Loan Contract
Under the terms of the custom construction loan contract, WFS maintained control and
possession of the construction loan principal throughout the home' s construction, distributing it
periodically as HHD completed work.
Under the contract, WFS had the authority to distribute the construction loan principal
directly to either the Applegates or HHD, in the form of "draws" against the borrowed principal.
WFS had written policies and procedures for the management of custom construction loans. The
Applegates and HHD, but not WFS, signed a written statement, separate from the contract,
detailing these procedures. The Applegates allege it was their understanding that WFS would
follow these procedures. The written statement stated in part:
Draws will be based on the percentage of completion per the submitted approved
contract, plans, and specifications, [ unless otherwise agreed] in writing WFS
will not advance any money for items not yet delivered and installed. WFS shall
at all times have the right to enter upon the property during the period of
construction work, and if the work is not satisfactory [ WFS] shall have the right
to stop the work and order its replacement, whether or not the unsatisfactory work
has already been incorporated into the improvements.
On -site inspections are typically completed between the 1st and 9th day of each
month....
Prior to the payment of any draw, a Certificate of Job Progress, signed by
both [ HHD] and the [ Applegates] will be required. Checks will be issued payable
to [ HHD] and the [ Applegates] unless WFS is previously instructed otherwise in
1 For the purposes of clarity, we refer to Charles Bucher, Jane Doe Bucher, and HHD
collectively as HHD. We refer to Washington Federal Savings and its parent company
Washington Federal Incorporated collectively as WFS. We refer to individuals when necessary,
and use first names for clarity.
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No. 43043 -6 -II
writing. However, in all cases, the final draw must be made payable to
HHD] and the [ Applegates].
Exhibit 62 at 1.
When managing the Applegates' construction loan, WFS usually mailed the check and a
certification ofjob progress to HHD' s office to collect the required signatures on the certification
of Charles for HHD and Richard for the Applegates), rather than waiting for the parties to come
into WFS' s office to pick up the check and sign the certification. WFS contended that it did this
because the Applegates were often out of town, and could not timely come in to WFS' s office to
sign the certification.
B. Disputes During Construction
The Applegates contended that they began to have disputes with HHD and WFS during
the home' s construction. The Applegates contended that HHD, among other things, ( 1) did not
follow the homes' building plans, ( 2) purchased substandard construction materials but charged
for high -
quality construction materials, ( 3) double -
billed the Applegates, and ( 4) failed to deduct
the Applegates' $ 52, 262. 50 deposit from its initial draw request.
In addition, the Applegates contended that someone forged Karen' s signature on the
Applegates' residential construction contract with HHD, and that Charles forged Richard' s
signature on both a draw check for $ 108, 172. 00 and on the corresponding certification.
Regarding Richard' s signatures, Charles admitted to signing Richard' s name on the draw check
for $ 108, 172. 00. But Charles contended that he did this because Richard told Charles to sign the
check in Richard' s name, and that Richard later signed the corresponding certification. Richard
contended that he could not remember signing the certification and that he did " not doubt that
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No. 43043 -6 -II
Charles] forged [ his] name on the [ corresponding] Certification as well." Clerk' s Papers ( CP) at
573.
The Applegates contended that WFS failed to prevent HHD' s wrongdoing through a
multitude of bad acts. First, the Applegates contended that Joni Cross, the Applegates' main
contact at WFS, refused the Applegates' requests to timely provide them with copies of HHD' s
invoices and draw requests, which delayed their discovery of HHD' s bad acts. Second, the
Applegates contended that WFS disbursed funds to HHD without signed certifications. Third,
the Applegates contended that WFS consistently sent draw checks to HHD, despite the
Applegates' request that WFS disburse the draw checks to them directly. Fourth, the Applegates
contended that WFS approved distributions of funds to HHD for incomplete construction. Fifth,
the Applegates contended that WFS failed to remedy HHD' s forgery of the $ 108, 172. 00 draw
check after the Applegates informed WFS of it. Finally, the Applegates contended that WFS
disbursed the remaining balance of the construction loan principal as a " final draw" before HHD
completed the home, despite the contract stating that those funds were not to be distributed until
the home' s completion.
C. The Applegates' Suit
The Applegates sued WFS claiming, among other things, negligence, breach of fiduciary
duty, and breach of contract. The trial court summarily dismissed the Applegates' claim against
WFS for breach of fiduciary duty on grounds that WFS had no fiduciary duty to the Applegates.
Later, the trial court summarily dismissed the Applegates' claim against WFS for negligence
under the independent duty doctrine, and allowed the case to proceed against WFS on the breach
of contract claim.
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No. 43043 -6 -I1
The Applegates also sued HHD. The claims against HHD included breach of contract,
fraud, and wrongful conversion. The matter was tried before a jury.
D. Exclusion of the Applegates' Witnesses
1. Exclusion ofExpert Forensic Handwriting Examiner Robert Floberg
The Applegates sought to admit the expert testimony of Robert Floberg, a forensic
handwriting examiner, to support their allegations of forgery: that Charles forged Richard' s
signature on the certification that authorized the $ 108, 172. 00 draw check and that Karen
Applegate' s signature on the residential construction contract was forged. The trial court
excluded this witness as a discovery sanction for the Applegates' failure to timely disclose
Floberg' s opinion.
The Applegates filed their Second Amended Complaint in January of 2010. After
granting the parties two continuances, the trial court set the trial date at June 20, 2011, and set a
case schedule that required the Applegates to disclose their rebuttal witnesses by February 28,
2011.
On April 14, 2011, six weeks past the rebuttal witness disclosure deadline, the
Applegates filed an amended disclosure of witnesses, listing seven previously undisclosed
witnesses ( including Floberg). HHD moved to exclude the Applegates' newly disclosed
witnesses, including Floberg. The trial court did not exclude the Applegates' witnesses at that
time, stating, " Striking witnesses ... is the harshest remedy that the [ c] ourt can impose. At this
stage, I' m more inclined to try to work a way where [ the] defense will not be prejudiced by these
witnesses, rather than striking them." Verbatim Report of Proceedings ( VRP) ( May 6, 2011) at
15.
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No. 43043 -6 -II
Instead of striking the newly disclosed witnesses, the trial court continued the trial date a
third time to October 4, 2011. The new case schedule set a new discovery cutoff of August 16,
2011. The trial court stated in the presence of both parties that the new discovery cutoff should
be a line in the sand that will not be ... stepped over." VRP ( May 6, 2011) at 17.
On June 10, 2011, HHD asked for the opinions of the Applegates' newly disclosed expert
witnesses. On July 1, 2011, HHD again asked the Applegates for the experts' opinions, and
specifically asked the Applegates to state whether Floberg would give any opinion at all. HHD
also stated on July 1, 2011 that it would move to strike the opinions of any experts who failed to
reach opinions by the discovery cutoff of August 16, 2011.
Floberg' s original deposition was scheduled for August 16, 2011, but did not occur. On
August 18, 2011, two days after the discovery cutoff, the Applegates emailed to inform HHD
that they were going to have Floberg examine two documents for potential forgeries: Richard' s
signature on the certification authorizing the expenditure on the $ 108, 172. 00 draw check and
Karen Applegate' s signature on the residential construction contract. On August 31, 2011,
which the Applegates claim was immediately after Floberg told them that he needed to see the
originals of both documents, the Applegates provided Floberg' s tentative opinion that Richard' s
signature on the certification and Karen' s signature on the residential construction contract were
potential forgeries, but stated that Floberg needed the original documents to engage in a more
formal analysis. In September of 2011, the parties argued over whether to depose Floberg in
King County or Pierce County, which further delayed the deposition.
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No. 43043 -6 -II
HHD moved to exclude Floberg' s opinion as a discovery sanction for the Applegates'
failure to timely disclose his opinion. The Applegates argued that they delayed providing
Floberg' s opinion because Floberg needed to see the original documents before making a final
opinion on whether a forgery existed.
The Applegates argued that they did not want to travel to King County to view the
original documents when they could instead simply wait until Floberg' s eventual deposition,
which they believed had to be conducted in Pierce County. The Applegates argued that the
conflict over where to conduct Floberg' s deposition delayed both the deposition and Floberg' s
examination of the original documents.
The trial court excluded Floberg' s testimony. In its written order, the trial court found
that the Applegates' failure to timely disclose Floberg' s opinion was willful and prejudicial, and
that lesser sanctions were inadequate.
2. Exclusion ofLay Character Witness Diana Behrens
The Applegates also sought to introduce the testimony of Diana Behrens, who had
previously hired HHD to build her and her husband' s house. Diana was prepared to testify that
HHD ruined their house, went over budget, and stole at least $ 75, 000 from her and her husband
David. HHD submitted David Behrens' s declaration which stated that HHD was not deceptive
or unfair and did not steal any money from the Behrens.
The trial court excluded Diana' s testimony under ER 404( b), ruling that it constituted
evidence going to HHD' s character so as to establish conformity therewith in the Applegates'
case. The trial court stated that "[ t] he problem I have is that all these things that[] [ Diana] is
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No. 43043 -6 -II
saying are simply allegations. They' ve not been proven. They' re just simply her opinion as to
what occurred in her situation and never went to trial." VRP ( Oct. 6, 2011) at 62 -63.
E. WFS Special Verdict Form
The trial court provided the jury with instructions: Jury instruction 2 stated in part:
In addition to the claims against [ HHD], [ the Applegates] also claim that
WFS] breached its construction loan agreement with the [ Applegates] by failing
to properly inspect the residence while it was under construction to make sure that
amounts requested by [ HHD] for building the [ home] were proper.
CP at 2699.
In addition to the jury instructions, the trial court provided the jury with two special
verdict forms: one for the Applegates' claims against WFS and one for the Applegates' claims
against HHD. WFS interrogatory 1 asked the jury:
Did Washington Federal Savings ( " WFS ") breach its contract to provide a
construction loan to the Applegates?
CP at 2739. The Applegates took exception to WFS interrogatory 1. They requested that the
trial court remove the reference to a " construction loan" and reword the interrogatory to ask,
D] id Washington Federal Savings breach its contract." VRP ( Oct. 31, 2011) at 393. The trial
court did not adopt the Applegates' proposed modification.
F. Jury Verdict and WFS' s Motion for Attorney Fees
This case proceeded to a jury trial that resulted in defense verdicts. The jury answered
No" to WFS interrogatory 1, finding that WFS did not breach its contract to provide a
construction loan to the Applegates.
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No. 43043 -6 -II
The jury resolved three issues in favor of HHD through its answers to the interrogatories
on the HHD special verdict form. First, the jury answered " No" to HHD interrogatory 1, finding
that HHD did not breach its contract with the Applegates. Second, the jury answered " No" to
HHD interrogatory numbers 9 and 10, finding that neither HHD nor the Buchers committed
fraud in respect to the draws and billings submitted to the Applegates. Third, the jury answered
No" to HHD interrogatory numbers 12, 13, 15, and 16, finding that neither HHD nor Charles
wrongfully converted the Applegates' funds by failing to deduct the Applegates' $ 52, 262. 50
deposit from their initial draw request, or by negotiating the $ 108, 172.00 draw check.
Following the jury verdict, WFS asked for $264, 115. 32 in attorney fees pursuant to its
contract with the Applegates. The contract' s attorney fee provision stated in part:
If [WFS] seeks the services of an to enforce any provisions of this
attorney ...
Agreement, the Note, the Security Instrument or other promises of the
Applegates] as contained in the loan documents, [ WFS] shall be entitled to all of
its attorney' s fees and costs of enforcement.
Exhibit 61 at 5 ( emphasis added).
The trial court did not award fees to WFS because the attorney fee provision authorized
fees only for " enforcement" of a contract. The trial court ruled that the attorney fee provision did
not intend to encompass WFS defending against a breach of contract claim.
The trial court awarded WFS only $200. 00 in statutory attorney fees under RCW
4. 84. 080. The trial court awarded HHD $200 in statutory attorney fees under RCW 4. 84.080,
500. 00 in attorney fees under CR 37( c), $ 1, 098. 91 in costs and litigation expenses, and $ 500. 00
in sanctions.
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No. 43043 -6 -II
On appeal, the Applegates challenge the trial court' s summary judgment ruling and the
jury verdict. WFS' s cross -appeal challenges the trial court' s decision against awarding attorney
fees pursuant to the contract.
ANALYSIS
I. JURY VERDICT
A. Jury Instructions and Special Verdict Forms
The Applegates argue that WFS interrogatory 1 misled the jury, such as to warrant a
retrial. We disagree.
We review challenged jury instructions de novo to ensure their legal sufficiency. Hough
v. Stockbridge, 152 Wn. App. 328, 342, 216 P.3d 1077 ( 2009). Jury instructions and special
verdict forms are legally sufficient if they allow the parties to argue their theories of the case, are
not misleading, and when taken as a whole, properly inform the jury of the applicable law.
Capers v. Bon Marche, 91 Wash. App. 138, 142, 955 P.2d 822 ( 1998).
Where the jury instructions are held legally sufficient, we review their specific wording
for an abuse of discretion. Bodin v. City ofStanwood, 130 Wash. 2d 726, 732, 927 P.2d 240
1996); Singh v. Edwards Lifesciences Corp., 151 Wn. App. 137, 151, 210 P.3d 337 ( 2009). A
trial court abuses its discretion if its decision is manifestly unreasonable or based on untenable
grounds or untenable reasons. Salas v. Hi -
Tech Erectors, 168 Wash. 2d 664, 668, 230 P.3d 583
2010).
Here, jury instruction 2 clarified WFS interrogatory 1. Jury instruction 2 stated in part:
The Applegates] also claim that [ WFS] breached its construction loan agreement
with the [ Applegates] by failing to properly inspect the [ home] while it was under
construction to make sure that amounts requested by [ HHD] for building the
home] were proper.
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CP at 2699. WFS interrogatory 1 asked, " Did Washington Federal Savings ( "WFS ") breach its
contract to provide a construction loan to the Applegates ?" CP at 2739.
Jury instruction 2 makes clear that the claim against WFS was that WFS failed to honor
the terms of its contract by failing to properly inspect the home and properly manage and
distribute the construction loan principal to HHD. Thus, jury instruction 2 resolved any
ambiguity within WFS interrogatory 1 by clarifying that interrogatory' s meaning. For this
reason, the instructions were legally sufficient because the jury instructions allowed the
Applegates to argue their theory of the case, were not misleading, and when taken as a whole,
properly informed the jury of the applicable law.
Because the jury instructions were legally sufficient, we review their specific wording for
an abuse of discretion. Bodin, 130 Wash. 2d at 732; Singh, 151 Wn. App. at 151. Here, the
difference between WFS interrogatory 1' s wording and the Applegates' requested alternative
was not significant enough to make the trial court' s decision to choose the former manifestly
unreasonable. Thus, the trial court did not abuse its discretion in deciding to word the legally
sufficient WFS interrogatory 1 as it did.
B. Exclusion ofFloberg
The Applegates next argue that the trial court erred by excluding Floberg' s expert
testimony. We disagree.
The trial court is in the best position to determine appropriate discovery sanctions, and
thus, we normally defer to its decision. Magana v. Hyundai Motor Am., 167 Wash. 2d 570, 583,
220 P.3d 191 ( 2009). We will overturn the trial court' s decision to exclude witnesses only for
abuse of discretion. Jones v. City of Seattle, 179 Wash. 2d 322, 337, 314 P.3d 380 ( 2013). A trial
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No. 43043 -6 -II
court abuses its discretion if its decision is manifestly unreasonable or based on untenable
grounds or untenable reasons. Salas, 168 Wash. 2d at 668.
Pierce County Local Rule (PCLR) 26 states the following requirements for cases
operating pursuant to a case schedule:
d) Scope of Disclosure. Disclosure of witnesses under this rule shall include the
following information:
3) Experts. A summary of the expert' s anticipated opinions and the basis
therefore and a brief description of the expert' s qualifications or a copy of
curriculum vitae if available.
e) Exclusion of Testimony. Any person not disclosed in compliance with this
rule shall not be called . testify at trial, unless the court orders otherwise for good
to
cause and subject to such conditions as justice requires.
Emphasis added.)
Before excluding a witness for a violation of a local rule like PCLR 26, the trial court
must consider, on the record, the three factors from our Supreme Court' s decision in Burnet v.
Spokane Ambulance, 131 Wash. 2d 484, 933 P.2d 1036 ( 1997). Jones, 179 Wash. 2d at 338.
Considering the Burnet factors on the written order excluding a witness is 2 See Teter
sufficient.
v. Deck, 174 Wash. 2d 207, 217, 274 P.3d 336 ( 2012).
The first Burnet factor is willfulness. Magana, 167 Wash. 2d at 584. A party' s disregard of
a court order without a reasonable excuse or justification is considered willful. 167 Wash. 2d at
584.
2 Whereas PCLR 26 creates a presumption of exclusion (rebutted by good cause and justice
concerns), the Burnet factors create the opposite presumption of admission ( rebutted by evidence
of willfulness, prejudice, and the inadequacy of lesser sanctions). Jones, 179 Wash. 2d at 343. In
the case of witness exclusion, Our Supreme Court held that Burnet controls over local discovery
rules. Jones, 179 Wash. 2d at 344.
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The second Burnet factor is prejudice to the opposing party. 167 Wash. 2d at 584, 587.
Prejudice looks not to whether abusive discovery prevented the opposing party from obtaining a
fair trial, but rather asks whether the abusive discovery prejudiced the opposing party' s ability to
prepare for the trial. 167 Wash. 2d at 589.
The third Burnet factor requires the trial court to consider lesser available sanctions.
167 Wash. 2d at 584, 590. The trial court must impose the least severe sanction that would serve
the underlying purpose of imposing a discovery sanction in the given case. 167 Wash. 2d at 590.
But the sanctions must not be too light, such that it undermines the purpose of discovery. 167
Wash. 2d at 590. " The purposes of sanctions orders are to deter, to punish, to compensate and to
educate." Wash. State Physicians Ins. Exch. & Ass 'n v. Fisons Corp., 122 Wash. 2d 299, 356, 858
P.2d 1054 ( 1993). Another purpose of sanctions is to " insure that the wrongdoer does not profit
from the wrong." Wash. State Physicians Ins. Exch. & Ass' n, 122 Wash. 2d at 356.
Here, the trial court found the three Burnet factors of willfulness, prejudice, and the
inadequacy of lesser sanctions in its written order. The trial court did not abuse its discretion
because the record supports the trial court' s finding that the Applegates committed a willful and
prejudicial discovery violation for which lesser sanctions were inadequate.
The Applegates' violation of the trial court' s order was the Applegates' second violation
of the trial court' s scheduling orders. The Applegates disclosed Floberg' s identity a month and a
half after the deadline for witness disclosure. Rather than exclude Floberg because of this
deadline violation, the trial court continued the trial to allow HHD to conclude discovery on the
Applegates' new witnesses. The trial court imposed a new discovery cutoff at this time, stating
in the presence of both parties that the new deadline was " a line in the sand that will not be .. .
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No. 43043 -6 -I1
stepped over." VRP (May, 6, 2011) at 16 -17. Nonetheless, the Applegates failed to disclose
Floberg' s potential opinion until August 31, 2011. 3
The Applegates' disregard of orders is willful unless the Applegates provide a reasonable
excuse or justification. Here, the single excuse that the Applegates had for failing to timely
disclose Floberg' s opinion was that they did not want to have Floberg travel to King County to
view the original certification and residential construction contract, when they could instead
simply wait until Floberg' s eventual deposition.
But the dispute over where Floberg would view the original documents began after
August 31, 2011, two weeks beyond the discovery deadline of August 16, 2011. Thus, the trial
court did not abuse its discretion in finding that the second violation was willful because the
record supports this finding. Magana, 167 Wash. 2d at 584.
Second, the Applegates' failure to timely provide HHD with information as to Floberg' s
opinion regarding forgery prejudiced HHD by preventing HHD from properly preparing its case.
The Applegates did not inform HHD which specific documents Floberg would review until
August 18, 2011, and did not tell HHD that Floberg found a potential forgery on one of the
documents until August 31, 2011.
3
The Applegates argue that the April 14, 2011 notification of Floberg' s identity as a witness
constituted a " summary ofthe expert' s anticipated opinions and the basis therefore" for purposes
of PCLR 26( d)( 3). The Applegates' notification stated the following:
Mr. Floberg is a forensic document examiner. He is expected to testify regarding
authenticity of signatures and documents submitted by Charles Bucher. CV attached.
CP at 3525. We affirm the trial court' s determination that this does not constitute a sufficient
summary of the expert' s anticipated opinions and the basis therefore." PCLR 26( d)( 3).
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After learning that Floberg had found a potential forgery, HHD had to consider hiring a
handwriting expert. HHD would also have needed time to prepare for Floberg' s deposition,
depending on his final opinion. Late disclosure of Floberg' s opinion hindered this. Thus, it was
not an abuse of discretion for the trial court to find that the Applegates' discovery violation was
prejudicial to HHD because the record supports this finding.
Finally, the trial court already granted a continuance due to the Applegates' prior
discovery violation. The Applegates' actions demonstrated that granting yet another continuance
would undermine the purpose of discovery. Monetary sanctions would not account for HHD' s
additional preparation, and would thus, fail to " insure that the wrongdoer does not profit from the
wrong." Wash. State Physicians Ins. Exch. & Ass 'n, 122 Wash. 2d at 356. Thus, the trial court did
not abuse its discretion by excluding Floberg for the Applegates' second violation of a discovery
order because the record supports its findings on the three Burnet factors.
C. Exclusion ofDiana Behrens
The Applegates argue that the trial court erred in excluding Diana Behrens' s testimony
under ER 404( b) because her testimony was properly admissible to prove an absence of mistake
or accident. We disagree.
We review the exclusion of evidence under ER 404( b) for abuse of discretion. State v.
DeVincentis, 150 Wash. 2d 11, 17, 74 P.3d 119 ( 2003). A trial court abuses its discretion if its
decision is based on untenable grounds or untenable reasons. Salas, 168 Wash. 2d at 668 -69.
ER 404( b) provides:
Evidence of other crimes, wrongs, or acts is not admissible to prove the character
of a person in order to show action in conformity therewith. It may, however, be
admissible for other purposes, such as proof of motive, opportunity, intent,
preparation, plan, knowledge, identity, or absence of mistake or accident.
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Evidence of a person' s prior misconduct is admissible only when the party seeking to admit the
evidence ( 1) demonstrates by a preponderance of the evidence that the misconduct occurred, (2)
identifies the purpose for the evidence' s admission, ( 3) establishes the evidence' s relevance to
proving an element of the charged crime, and ( 4) weighs the evidence' s probative value against
its prejudicial effect. State v. Gresham, 173 Wash. 2d 405, 421, 269 P.3d 207 ( 2012). A party
seeking to introduce evidence under ER 404(b) has the burden of proving the first three of these
elements, and we presume that evidence of prior misconduct is inadmissible. Gresham, 173
Wash. 2d at 421. Regarding the fourth element, the trial court should balance the probative value
of the evidence against its prejudicial effect on the record before using its discretion to admit
evidence under ER 404( b). State v. Gogolin, 45 Wash. App. 640, 645, 727 P.2d 683 ( 1986).
Here, the trial court said, " The problem I have is that all these things that[] [ Diana] is
saying are simply allegations. They' ve not been proven. They' re just simply her opinion as to
what occurred in her situation and never went to trial." VRP ( Oct. 6, 2011) at 62 -63. Diana' s
testimony consisted of allegations about HHD' s alleged wrongs against Diana and her husband
David. David declared that HHD committed no wrongdoing. The Applegates cite nothing that
lends additional support to Diana' s allegations. Thus, this determination by the trial court was
not so unreasonable as to constitute an abuse of discretion.
If the trial court does not find that a witness' s allegations occurred on a more probable
than not basis, it has not found the first element of the ER 404( b) test. Exclusion of the witness' s
character testimony is warranted at this point because the party seeking admission of character
evidence must prove each of the first three elements of the ER 404( b) test before the trial court
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may admit character evidence. Gresham, 173 Wash. 2d at 421. Thus, the trial court did not abuse
its discretion in excluding Diana' s testimony under ER 404( b).
III. MOOTNESS OF THE TRIAL COURT' S SUMMARY JUDGMENT RULINGS
The Applegates argue that the trial court erred by granting summary judgment to WFS on
their claims of negligence and breach of fiduciary duty. We do not review this issue because it is
moot.
A moot case is one which seeks to determine an abstract question which does not rest
upon existing facts or rights. "' State v. G.A.H., 133 Wash. App. 567, 572, 137 P.3d 66 ( 2006)
quoting Hansen v. W. Coast Wholesale Drug Co., 47 Wash. 2d 825, 827, 289 P.2d 718 ( 1955)).
We will not review a moot case unless it presents issues of continuing and substantial public
interest, considering ( 1) the public or private nature of the issue presented, ( 2) the desirability of
an authoritative determination which will provide future guidance to public officers, and ( 3) the
likelihood that the question will recur. In re Marriage ofHorner, 151 Wash. 2d 884, 891 -92, 93
P.3d 124 ( 2004).
The jury is the trier of fact. Jurgens v. Am. Legion, Cashmere Post 64 Inc., 1 Wash. App.
39, 43, 459 P.2d 79 ( 1969). Here, we uphold the jury' s defense verdicts. Through a special
verdict form, the jury determined that HHD did not breach its contract with the Applegates,
commit fraud in respect to the draws and billings submitted to the Applegates, or wrongfully
convert the Applegates' funds. Thus, the jury has established as a fact that HHD did not commit
any wrongdoing related to its dealings with the Applegates.
The Applegates' claims for negligence and breach of fiduciary duty assert that WFS
failed to prevent HHD' s wrongdoing. The jury established as a fact that HHD committed no
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wrongdoing. WFS cannot have failed to properly protect the Applegates from HHD' s
wrongdoing when HHD committed no wrongdoing. Thus, whether the trial court erred in
granting summary judgment in favor of WFS on these claims is an abstract question that does not
rest upon existing facts or rights.
This moot issue does not present issues of continuing and substantial public interest
because the issue is essentially private in nature, a determination is not necessary to provide
guidance to public officers, and the particular issue raised is unlikely to recur. See Horner, 151
Wash. 2d at 891 -92. Thus, we do not review whether the trial court erred by granting summary
judgment to WFS on the Applegates' claims of negligence and breach of fiduciary duty because
the issue is moot.
IV. ATTORNEY FEES ON THE CONTRACT
WFS argues on its cross appeal that RCW 4. 84. 330 required the trial court to award its
attorney fees as the prevailing party under the contract' s attorney fee provision. We agree.
We review de novo whether a statute authorizes attorney fees. Estep v. Hamilton, 148
Wn. App. 246, 259, 201 P.3d 331 ( 2008). RCW 4. 84. 330 states the rule for attorney fees in any
action on a contract:
In any action on a contract ... where such contract or lease specifically provides
that attorneys' fees and costs, which are incurred to enforce the provisions of such
contract or lease, shall be awarded to one of the parties, the prevailing party,
whether he or she is the party specified in the contract or lease or not, shall be
entitled to reasonable attorneys' fees in addition to costs and necessary
disbursements.
As used in this section " prevailing party" means the party in whose favor
final judgment is rendered.
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Where RCW 4. 84. 330 applies, an attorney fee award is mandatory. Singleton v. Frost, 108
Wash. 2d 723, 728 -29, 742 P.2d 1224 ( 1987). RCW 4. 84. 330' s statement that attorney fees are
reciprocal "[ i]n any action on a contract" applies to any action in which a person alleges that
another has contract liability. Herzog Aluminum, Inc. v. Gen. Am. Window Corp., 39 Wash. App.
188, 197, 692 P.2d 867 ( 1984)..
RCW 4. 84. 330 supports awarding attorney fees to a prevailing party under a contractual
provision whenever the party- opponent would have been entitled to attorney fees as a prevailing
party. Herzog Aluminum, Inc., 39 Wash. App. at 196 -97. But a contractual provision that
authorizes attorney fees for enforcement of a contract authorizes attorney fees only for claims
directly related to the contractual document containing that provision. Boguch v. Landover
Corp., 153 Wash. App. 595, 619 -20, 224 P.3d 795 ( 2009).
Here, the Applegates sued to enforce the contract against WFS, and the jury returned a
defense verdict on the contract claim. Had the Applegates prevailed on their contract claim, the
Applegates would have been entitled to attorney fees under RCW 4. 84. 330. Thus, RCW
4. 84. 330 entitles WFS to attorney fees as the prevailing party on the contract claim. See Herzog
Aluminum, Inc., 39 Wash. App. at 196 -97.
We grant WFS attorney fees because WFS prevailed on the contract claims. But on
remand the trial court must segregate the fees and costs incurred defending against the claims
directly related to the contractual document containing the attorney fee provision from the fees
and costs incurred litigating other claims in this case. This is unless the trial court finds that the
claims are "`` so related that no reasonable segregation of successful and unsuccessful claims can
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be made.'" Boguch, 153 Wash. App. at 620 ( quoting Mayer v. City ofSeattle, 102 Wash. App. 66,
80, 10 P.3d 408 ( 2000)).
ATTORNEY FEES ON APPEAL
A. The Applegates
The Applegates request attorney fees on appeal, pursuant to RCW 4. 84. 330. Because the
Applegates have not prevailed, they are not a prevailing party entitled to attorney fees under
RCW 4. 84. 330.
B. HHD
HHD requests attorney fees on appeal, citing only RAP 18. 1. RAP 18. 1( b) requires a
party to submit argument and citation to authority entitling it to attorney fees on appeal.
Wachovia SBA Lending, Inc. v. Kraft, 165 Wash. 2d 481, 493, 200 P.3d 683 ( 2009). HHD cited
only RAP 18. 1, and provided no argument regarding attorney fees in its brief. Thus, we deny
HHD' s request for attorney fees.
C. WFS
WFS requests attorney fees on appeal under RAP 18. 1. Where a prevailing party is
entitled to attorney fees below, they are entitled to attorney fees if they prevail on appeal.
Sharbono v. Universal Underwriters Ins. Co., 139 Wash. App. 383, 423, 161 P.3d 406 ( 2007).
WFS was entitled below to attorney fees incurred defending against the claims directly related to
the contractual document containing the attorney fee provision, and WFS has prevailed on
appeal. Thus, WFS is entitled to attorney fees incurred defending against the Applegates' appeal
of their claims directly related to the contractual document containing the attorney fee provision,
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subject to compliance with RAP 18. 1 and RCW 4. 84. 330. The commissioner of our court will
make an appropriate award upon proper application. RAP 18. 1( f); RCW 4. 84. 330.
We affirm the jury verdict and dismiss the Applegates' challenge to the trial court' s
summary judgment rulings as moot. We reverse the trial court' s ruling denying attorney fees to
WFS and remand for an award of attorney fees, limited to fees and costs incurred defending
against the Applegates' contract action. Finally, we grant WFS attorney fees on appeal, limited
to fees and costs incurred defending against the Applegates' appeal of their claims directly
related to the contractual document containing the attorney fee provision, subject to compliance
with RAP 18. 1 and RCW 4. 84. 330.
A majority of the panel having determined that this opinion will not be printed in the
Washington Appellate Reports, but will be filed for public record in accordance with RCW
2. 06. 040, it is so ordered.
We concur:
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