Scott A. Walker And Fred Wagner, V Scott Serven ( 2014 )

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IN THE COURT OF APPEALS OF THE STATE OF WASHING
DIVISION II
SCOTT A. WALKER and FRED WAGNER,
Appellants, 06 A U 1: 1Cf' tl
V.
SCOTT SERVEN, a single man, UNPUBLISHED OPINION
Respondent.
MAXA, J. Scott Walker and Fred Wagner appeal the trial court' s summary judgment '
dismissal of their claims against Scott Serven for money due on loans, securities fraud, and
common law fraud arising from their investment in a project to renovate and operate a hotel in
Mexico. We hold that summary judgment was appropriate because Walker and Wagner failed to
show that there were genuine issues of material fact that ( 1) the parties entered into a loan
agreement or any other agreement that would require Severn to refund the money Walker and
Wagner invested, (2) Serven made a misrepresentation or engaged in fraudulent or deceitful
conduct upon which Walker and Wagner reasonably relied sufficient to trigger liability for
securities fraud, and ( 3) Serven knowingly made a false statement of material fact as required to
recover for common law fraud. Accordingly, we affirm.
No. 44063- 6- 11
FACTS
In 2005, Serven, Scott Griffin, Rick Seddon, and Chris Johnston decided to purchase and
renovate a dilapidated hotel in Loreto, Mexico. The four investors made the following capital
contributions to the project: Serven: 55 percent; Griffin: 25 percent; Seddon: 10 percent; and
Johnston: 10 percent. Serven and Griffin formed a Mexican corporation to own the hotel
property. The investors all agreed to contribute additional capital to the project in proportion to
their initial investments. They also agreed that once the project was completed, they would
receive shares in the Mexican corporation in proportion to their total contributions.
Both Johnston and Seddon initially contributed $ 120, 000 to the project. The document
governing Johnston' s interest provided:
On the day of May 3, 2006 Chris and Alicia Johnston are hereby granted the right
to purchase 10% of the Loreto Hotel Mission stock.
The purchase price is base[ d] on the final cost to purchase and remodel /build the
Hotel. Receipt is hereby acknowledged for payment to date of $120, 000. 00.
The balance is payable as the expenses occur. The purchase[ r] hereby agrees to
pay the share of expenses equal to their respective ownership within five business
days] of notice. After payment for this stock is received in fall, the purchaser
shall be at their own expense officially added to the Mexican corporation " Loreto
Hotel Mission[ "].
Profit and los[ s] es shall be distributed to each member of the corporation based on
their pro -rat[ a] interest in the corporation.
Clerk' s Papers ( CP) at 474. Seddon signed' an identical agreement.
Soon thereafter, Johnston and Seddon decided to withdraw from the project. In 2006,
Walker and Wagner became involved. The parties dispute whether Walker and Wagner
purchased Johnston and Seddon' s interests or whether their investments were made under a
1 There are no signed copies of either agreement in the record. But Serven stated in a declaration
that he at one time had documents bearing Johnston' s and Seddon' s signatures. And Walker and
Wagner do not dispute that these agreements were signed.
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No. 44063 -6 -II
separate agreement. Serven testified that Wagner acquired Seddon' s interest in the corporation
and that Walker acquired Johnston' s interest. Seddon testified that Walker bought Johnston' s
interest and that Wagner purchased his interest. By contrast, Walker asserts that he made all
payments to Serven' s bank accounts. In his deposition, Serven testified that Walker had
purchased his interest from Johnston. However, he acknowledged that there was a document
stating that Walker had paid $ 120, 000 to the entity, not Johnston'2 The parties do not dispute
that Wagner made an initial $ 120, 000 payment directly to Seddon.
Walker and Wagner made a series of payments to the Mexican corporation between
December 2005 and February 2010. Both Walker and Wagner stated that these payments went
to an account controlled by Serven and in his name. The parties disputed the nature of these
payments. Serven stated that, except for a $ 180, 000 payment Wagner made in 2008 to cover
Griffin' s shortfall when he could no longer make capital contributions to the hotel, all of the
payments were capital contributions. Walker and Wagner asserted that all of the payments were
loans.
The parties had ongoing discussions about issuing stock to Wa er an agner or their
-
contributions to the corporation. Beginning in 2007, the parties began discussing the option of
creating a United States entity to hold shares in the Mexican corporation. In a May 2007 e -mail
to Walker and Wagner, Serven stated:
Currently the most significant action we are taking is to form a Washington
corporation that will hold all of the shares of stock in the Loreto Mission Hotel
corporation in Mexico. All of the shares in the [ M] exican corporation will be
2 Serven appears to challenge the authenticity of this. document. He stated that he " discovered
that the Walkers created this document, signed my name to it and had the hotel buy [ Johnston]' s
interest back and then bought their interest from the hotel." CP at 343. When asked if it was
true that the Walkers bought a 10 percent interest from the entity itself, Serven responded,
That' s the way it' s documented." CP at 343 -44.
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No. 44063 -6 -II
transfer[ r] ed to the Washington corporation and we will all individually own
shares in the Washington corp[ oration] in accordance with our capit[ a] l account.
CP at 181. The parties then engaged in ongoing discussions with attorneys and accountants to
address the potential benefits to or consequences of having the shares held by a United States
entity.
In September 2010, Wagner told Serven that he wanted to have all of the Mexican
corporation' s stock transferred to a United States corporation " as we all previously agreed to."
CP at 206. Serven responded that Wagner could hold his stock in a United States corporation if
he chose to do so, even if Serven chose to hold his in the Mexican corporation. In December
2010, Wagner wrote to Serven stating that he was " perplexed by your unilateral decision to
change the process you, Walker, and I had agreed upon to facilitate the stock transfer." CP at
249. Serven responded that there were no beneficial reasons to hold the stock in a United States
corporation and that his decision not to do that did not affect Walker and Wagner' s ownership
interest.
In October 2011, Walker and Wagner filed a complaint against Serven for money due on
loans and for violation of the Securities. Act of Washington ( WSSA), chapter 21. 20 RCW. They
claimed that they had agreed to make advances with the understanding that the advances would
become loans if the parties could not agree on the terms of ownership in the hotel. Walker and
Wagner also made claims under the WSSA for the sale of unregistered securities and for
securities fraud and a claim for common law fraud.
Serven filed a motion for partial summary judgment, asking that the trial court dismiss
the money due on loans claim. He argued that Walker and Wagner failed to show any facts
supporting the existence of a contract for a loan. In opposition to Serven' s motion, Walker stated
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No. 44063 -6 -II
that he and Wagner made a series of advances to Serven with the understanding that he and
Wagner would become shareholders in a United States entity. When he and Wagner made the
advances, he claimed that there was " a specific understanding and an agreement that these
advances would not be for an investment in a Mexican entity." CP at 34. He further stated that
t]here was also a clear understanding that if the parties could not reach agreement on the terms
of the final entity that the advances would be returned to us." CP at 34. The trial court granted
the motion and dismissed Walker' s and Wagner' s claims for money due on loans, concluding
that Walker and Wagner had failed to show any factual basis for the existence of a loan.
Serven again moved for partial summary judgment, seeking dismissal of Walker' s and
Wagner' s claims for sale of unregistered securities, securities fraud, and common law fraud. He
argued that Walker' s and Wagner' s interests in the corporation in this case were not " securities"
under the WSSA because they purchased their interests in one -on -one transactions with Johnston
and Seddon, respectively; because the corporate shares were never publicly offered; and because
there was no effort to solicit the sale of Johnston' s or Seddon' s interests to the public. Serven
also claimed that there was nofraud because it was only - fter Walker and Wagner invested In the _
a
hotel that the parties began discussing the option of holding the shares in a United States entity.
He further argued that the WSSA and common law fraud claims were barred by the three -year
statute of limitations because Walker and Wagner should have reasonably discovered the alleged
fraud when they purchased shares in 2006 and, at the very least, they should have discovered the
alleged fraud in 2007 when Walker began working for Serven and took over the property' s
financial records.
Walker and Wagner responded that Serven had acted fraudulently because ( 1) he had
initially agreed to create a United States entity to hold the property in Mexico, ( 2) he refused to
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No. 44063 -6 -II
document the parties' transactions as the parties had agreed, ( 3) he unilaterally expanded the
scope of the project by adding to the hotel' s construction, ( 4) he asked the parties to sign false
documents, and ( 5) he failed to provide the parties with meaningful financial information.
Regarding the statute of limitations issue, Walker and Wagner argued that between 2005 and
2010, Serven repeatedly represented to them that he would create a United States entity.
Therefore, they did not discover that he had failed to follow through on the promise until 2010 at
the earliest.
Regarding the creation of a United States entity, Walker stated that it was Wagner' s and
his understanding that they would become shareholders in a United States entity in exchange for
the advances they had made to the corporation. He stated that there was a clear understanding
that the advances were made for the formation of a United States corporation, not a Mexican
corporation, and that if the parties could not reach agreement on the terms of the final entity, the
advances would be refunded. He stated that on June 1, 2011, it became clear to Walker and
Wagner that Serven had refused to create a United States entity or to document the transactions
as loans. -Walker further stated that he received his interest in the corporation from Serven and
no other investor, and that all of the money he paid on the project went into an account in
Serven' s name. Wagner submitted a similar declaration, but stated that he acquired all of his
interest from Serven except for the first $ 120, 000 that he paid to Seddon.
The trial court granted Serven' s motion, stating in its oral ruling that Walker' s and
Wagner' s investments were not securities, Serven did not sell any securities, and there was no
securities fraud or common law fraud. The trial court further ruled, " If we get to the issue of the
statute of limitations, [ the claims] would be barred by the statute of limitations." Report of
Proceedings ( Aug. 31, 2012) at 21.
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No. 44063 -6 -II
Walker and Wagner appeal the trial court' s dismissal of all of their claims for money due
3
on loans, securities fraud, and common law fraud .
ANALYSIS
A. STANDARD OF REVIEW
We review a trial court' s order granting summary judgment de novo. Loeffelholz v. Univ.
of Wash., 175 Wash. 2d 264, 271, 285 P.3d 854 ( 2012). Summary judgment is appropriate where,
viewing the evidence in the light most favorable to the nonmoving party, there is no genuine
issue of material fact and the moving party is entitled to judgment as a matter of law.
Loeffelholz, 175 Wash. 2d at 271. " A genuine issue of material fact exists where reasonable minds
could differ on the facts controlling the outcome of the litigation." Ranger Ins. Co. v. Pierce
County, 164 Wash. 2d 545, 552, 192 P.3d 886 ( 2008). If reasonable minds can reach only one
conclusion on an issue of fact, that issue may be determined on summary judgment. M.
A.
Mortenson Co. v. Timberline Software Corp., 140 Wash. 2d 568, 579, 998 P.2d 305 ( 2000).
The moving party bears the initial burden of showing that there is no genuine issue of
material fact. Young v. Key Pharins:,7nc., 112- Wn.2d 216; 225 -;770 - :2-
P 2 .- - moving
defendant can meet this burden by showing that there is an absence of evidence to support the
plaintiff s case. Howell v. Spokane & Inland Empire Blood Bank, 117 Wash. 2d 619, 624, 818 P.2d
1056 ( 1991). The burden then shifts to the plaintiff to come forward with sufficient evidence to
establish the existence of each essential element of the plaintiff s case. Howell, 117 Wash. 2d at
625. If the plaintiff does not submit such evidence, summary judgment is appropriate. Howell,
117 Wash. 2d at 625.
3 Walker and Wagner do not contest the trial court' s dismissal of their claim for sale of an
unregistered security.
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No. 44063 -6 -II
A nonmoving party must present more than " mere possibility or speculation" to
successfully oppose summary judgment. Doe v. Dep' t of Transp., 85 Wash. App. 143, 147, 931
P.2d 196 ( 1997). "[ A] non -
moving parry may not rely on speculation or on argumentative
assertions that unresolved factual issues remain." White v. State, 131 Wash. 2d 1, 9, 929 P.2d 396
1997).
B. MONEY DUE ON LOANS CLAIM
Walker and Wagner argue that there are genuine issues of material fact regarding whether
the contributions they made to the corporation were loans. We disagree.4
A loan is defined as follows:
The word loan imports an advancement of money or other personal property to a
person, under a contract or stipulation, express or implied, whereby the person to
whom the advancement is made binds himself to repay it at some future time,
together with such other sum as may be agreed upon for the use of the money or
thing advanced."
Port ofLongview v. Taxpayers ofPort ofLongview, 85 Wash. 2d 216, 225, 527 P.2d 263 ( 1974)
internal quotation marks omitted) ( quoting State ex rel. O' Connell v. PUD I ofKlickitat County,
79 Wash. 2d 237, 2415 484 P.2d 393 ( 197 1)).- A borrower' s promise to repay loaned-funds is an
essential element of a loan agreement. Nat' l Bank of Commerce ofSeattle v. Preston, 16 Wn.
App. 678, 680, 558 P.2d 1372 ( 1977).
4 As a preliminary matter, the portion of Walker' s and Wagner' s brief devoted to their loan claim
predominantly raises arguments and theories not argued in the trial court. They appear to argue
that there was an issue of fact as to whether the parties merely had an " agreement to agree" and
that they were entitled to restitution damages because the parties did not reach agreement and
because Serven was unjustly enriched by their contributions to the hotel project. Br. of
Appellant at 14. But below, Walker and Wagner argued only that they were entitled to a
repayment of loans made to Serven and the hotel. They did not argue the theories of unjust
enrichment and restitution that they now argue on appeal. Accordingly, we decline to address
these arguments. RAP 2. 5( a); Karlberg v. Otten, 167 Wash. App. 522, 531, 280 P.3d 1123 ( 2012).
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No. 44063 -6 -II
Here, in a declaration in opposition to Serven' s summary judgment motion on the loan
claim, Walker described the nature of the payments as follows:
3. The advances were made with the understanding that Fred Wagner and I
would become shareholders in a [ United States] based entity in exchange for the
advances. Scott Serven continued to indicate that he would cause the formation
of such an entity. However, in spite of his promises to do so he eventually
refused to do so.
5. There was also a clear understanding that if the parties could not reach
agreement on the terms of the final entity that the advances would be returned to
US.
6. Thus far, Serven has failed and refused to document such transactions as a
purchase of securities in a [ United States] entity or as a loan, in accordance with
the agreement of the parties.
7. On or about June 1, 2011, it became clear to [ Walker and Wagner] that
Serven] would continue to refuse to either sell an equity interest in a [ United
States] based entity, or to document the transactions as loans.
CP at 375. Wagner submitted a nearly identical declaration.
Even when viewing these declarations in the light most favorable to Walker and Wagner,
no reasonable minds could differ on the absence of any fact supporting the existence of a loan.
Walker and Wagner clearly stated that they made advances to the project in exchange for shares
in a corporation.- According to their testimony, their advances would - e refunded - ri y if n0
b o
agreement could be reached on the form of the final entity. As a result, the evidence shows that
Walker and Wagner were making conditional investments in a corporation, not loans.
Further, Walker and Wagner presented no evidence that Serven agreed to a loan
transaction. There was no evidence regarding independent written or oral loan agreements,
whether and in what amount interest was to be charged on the loans, or the terms of repayment.
And Walker and Wagner did not present any other evidence that a loan agreement had been
made. In fact, Walker and Wagner expressly alleged that Serven refused to document the
transaction as a loan.
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No. 44063 -6 -II
We hold that Walker and Wagner failed to come forward with sufficient evidence to
create a genuine issue of material fact regarding the existence of loans made to Serven.
Accordingly, the trial court did not err when it granted Serven' s motion to dismiss claims based
on that theory.
C. SECURITIES FRAUD CLAIM
Walker and Wagner argue that the trial court erred when it dismissed their securities
fraud claims because, as a matter of law, their investments were securities and Serven was a
seller of those securities and because there were genuine issues of material fact regarding
whether Serven made misrepresentations regarding the formation of a United States entity. Even
assuming, without deciding, that Serven was a seller of securities to Walker and Wagner, there is
no evidence supporting Walker' s and Wagner' s claim that Serven made any misrepresentations
or engaged in fraudulent or deceitful conduct upon which Walker and Wagner reasonably relied.
Therefore, we hold that Walker' s and Wagner' s securities fraud claims fail.
1. Securities Act of Washington
The primary purpose of the WSSA is to protect investors from the speculative or
fraudulent schemes of promoters. Cellular Eng' g, Ltd. v. O' Neill, 118 Wn.2d' 16, 23, 820 P.2d
941 ( 1991). " To accomplish this purpose, the [ WSSA] is interpreted broadly." Kinney v. Cook,
159 Wash. 2d 837, 844, 154 P.3d 206 ( 2007).
RCW 21. 20. 010 provides a cause of action for securities fraud:
It is unlawful for any person, in connection with the offer, sale or purchase of any
security, directly or indirectly:
1) To employ any device, scheme, or artifice to defraud;
2) To make any untrue statement of a material fact or to omit to state a
material fact necessary in order to make the statements made, in the light of the
circumstances under which they are made, not misleading; or
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No. 44063 -6 -II
To engage in any act, practice, or course of business which operates or
3)
would operate as a fraud or deceit upon any person.
Under the statute, a defendant is subject to liability if ( the transaction constitutes a " security ",
1)
2) the defendant offers or sells the security, and ( 3) the defendant commits a fraudulent or
deceitful act in connection with the offer or sale. See Kinney, 159 Wash. 2d at 842. We assume
without deciding that Walker and Wagner provided sufficient evidence to establish the first two
elements and address only the third element.
2. Misrepresentation or Fraudulent /Deceitful Act
Walker and Wagner argue that the trial court erred when it granted Serven' s motion to
dismiss their securities fraud claims because there was a genuine issue of fact regarding whether
Serven engaged in a fraudulent or deceitful act in representing to them that a United States
corporation would be formed. We disagree.
In order to recover for securities fraud under RCW 21. 20. 010, " the purchaser of a
security must prove that the seller and /or others made material misrepresentations or omissions
about the security, and the purchaser relied on those misrepresentations or omissions." Stewart
v. Estate of Steiner, 122 Wn. App. 258, 264, 93 P.3d 919 ( 2004). The purchaser need not show
an intent to defraud. Go2Net, Inc. v. FreeYellow. com, Inc., 126 Wash. App. 769, 775, 109 P.3d
875 ( 2005), aff'd, 158 Wash. 2d 247, 143 P.3d 590 ( 2006). A material fact is one to which a
reasonable person would attach importance in determining his or her choice of action in the
transaction in question. Aspelund v. Olerich, 56 Wash. App. 477, 481 -82, 784 P.2d 179 ( 1990).
The purchaser' s reliance must be reasonable under the circumstances. FutureSelect Portfolio
Mgmt., Inc. v. Tremont Grp. Holdings, Inc., 175 Wash. App. 840, 868, 309 P.3d 555 ( 2013),
review granted, 316 P.3d 495 ( 2014).
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No. 44063 -6 -II
Here, Walker and Wagner argue that Serven represented that their investments would
result in the issuance of stock in a United States corporation. Walker and Wagner cite an e- mail
from Serven in 2007, in which he stated:
Currently the most significant action we are taking is to form a Washington
corporation that will hold all of the shares of stock in the Loreto Mission Hotel
corporation in Mexico. All of the shares in the [ M] exican corporation will be
transfer[ r] ed to the Washington corporation and we will all individually own
shares in the Washington corp[ oration] in accordance with our capit[ a] l account.
CP at 181. There also was evidence that Serven' s lawyer had created a certificate of formation
and operating agreement for a Washington limited liability company.
Walker and Wagner also point to ongoing e -mail discussions in 2010 between the
investors and their lawyer and accountant regarding the feasibility and practicality' of creating a
United States corporation. •The 2010 e =mails do not include any statements by Serven that a
United States entity would be formed, but they raise an inference that the parties believed that
such an entity might be formed. Walker and Wagner argue that Serven' s representations
regarding a United States corporation constituted securities fraud because he ultimately decided
not to form a United States corporation. -_
They - lso state ill declarations that they relied on -
a -
Serven' s representation that he would create a United States entity when they made payments to
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No. 44063 -6 -II
5
him.
However, Walker and Wagner provided no evidence that Serven made any
misrepresentation regarding formation of a United States corporation. A misrepresentation
requires a false statement regarding an existing fact, not a statement of a future intention. See
Havens v. C &D Plastics, Inc., 124 Wash. 2d 158, 182, 876 P. 2d.435 ( 1994) ( negligent
misrepresentation claim). Walker and Wagner have produced no evidence suggesting that
Serven never intended to create a United Stated corporation. Even viewing the evidence in a
light most favorable to Walker and Wagner, the record shows no more than that Severn initially
may have intended to create a United States corporation but later decided against that course of
action after consulting with lawyers and accountants.
Further, the evidence does not reflect that Serven engaged in any deceitful or fraudulent
conduct. At best, the parties had an agreement that they would attempt to agree on the structure
of the corporation that would own the hotel. The fact that Walker and Wagner wanted to form a
United States corporation does not somehow convert Serven' s business decision not pursue that
option into a fraudulent act. Theevidence shows only that sophisticated businessmen Who had
previously worked together evaluated a number of options and then disagreed as to the
5 Walker and Wagner cite additional material in the record that does not support their position.
First, they cite two unsigned documents titled "Agreement Among Investors" that would have
increased Serven' s ownership interest in the Mexican corporation after he made additional
capital contributions when Griffin was unable to pay his portion in 2008. CP at 160 =
64, 166 -71.
But these documents make no reference to the formation of a United States entity. Second,
Walker and Wagner cite to a diagram of the entities controlling the hotel and a written document
to the same effect, both of which include a United States entity that, they argue, controlled the
project. However, the United States corporation, which Serven ultimately formed in 2008 in
Wyoming, was for the sole purpose of loaning funds to the Mexicadcorporation, not for holding
title to or managing the property.
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No. 44063- 6- 11
appropriate course of action. These facts are insufficient to avoid summary judgment on the
WSSA claim.
Finally, the evidence shows that Walker and Wagner could not reasonably have relied on
Serven' s statements or conduct when making contributions to the project. Again, the parties had
no more than an oral agreement to agree regarding the corporate structure, and all the parties
were exploring whether forming a United States corporation was advisable. And the evidence
indicated that Griffin, the other investor, did not approve of forming a United States corporation.
Under these circumstances, it was unreasonable for Walker and Wagner to rely on such a vague
understanding between the parties.6
We hold that there were no genuine issues of material fact regarding whether Serven
made misrepresentations or engaged in any deceitful or fraudulent conduct regarding creation of
a United States entity to hold the shares in the Mexican corporation and whether Walker and
6
We note that a violation of RCW 21. 20. 010 requires " proof of the seller' s material, preclosing
misrepresentation or omission." Go2Net, 158 Wash. 2d at 253 ( emphasis added).. The earliest
alleged misrepresentation Serven made regarding the Washington corporation. was in 2007, two
years after Walker and Wagner made their first payments. We need not decide whether conduct
after Walker and Wagner began contributing to the project could support a. WS SA claim.
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No. 44063 -6 -II
Wagner reasonably relied on those representations in making their contributions to the project.
Accordingly, the trial court did not err in granting summary judgment on the securities fraud
claim.8
D. COMMON LAW FRAUD CLAIM
Walker and Wagner argue that the trial court erred when it dismissed their common law
fraud claim because there was a genuine issue of material fact as to whether Serven' s acts were
fraudulent. We disagree.
The standard for common law fraud is more stringent than for securities fraud. For
instance, for common law fraud the plaintiff must prove an actual intent to deceive. Go2Net, 126
Wash. App. at 775. To support a claim for common law fraud, the plaintiff must prove by clear,
cogent and convincing evidence:
1) representation of an existing fact; ( 2) materiality; ( 3) falsity; ( 4) the speaker' s
knowledge of falsity; ( 5) intent of the speaker that it should be acted upon by
its
the plaintiff, (6) ignorance of its falsity; ( 7) plaintiff' s reliance on the
plaintiff' s
truth of the representation; ( 8) plaintiff' s right to rely upon it; and ( 9) damages
suffered by the plaintiff.
Stiley v Block, 130 Wn:2d 486, 505, 925 P.-2d 194 ( 1996):
7
Walker and Wagner also argue that Serven violated the WSSA because he failed to disclose his
decision to expand the project' s scope and that " Serven asked [ Walker and Wagner] to sign and
backdate proxies with regard to the Mexican corporation that were materially false and
deceptive." Br. of Appellants at 23 -24. But Walker and Wagner do not attempt to show any
alleged misrepresentation or omission was material or deceitful and they do not attempt to show
that they relied on the misrepresentations or omissions. They also argue that Serven violated the
WSSA because he failed to record their capital transfers and failed to provide them with
financial information, but fail to cite any evidence in the record supporting the alleged material
issues of fact. Accordingly, we decline to address these arguments further.
8 Because we hold that the trial court properly dismissed Walker' s and Wagner' s securities fraud
claims, we need not address whether the statute of limitations barred these claims.
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No. 44063 -6 -II
When reviewing a claim on summary judgment for which the burden of proof is clear,
cogent, and convincing evidence, " we must determine whether, viewing the evidence in the light
most favorable to the nonmoving party, a rational trier of fact could find that the nonmoving
party supported his or her claim with clear, cogent, and convincing evidence." Woody v. Stapp,
146 Wn. App. 16, 22, 189 P.3d 807 ( 2008). In other words, " the challenging party must offer
evidence establishing a prima facie case supporting the claim or defense." Woody, 146 Wn.
App. at 22.
We hold that the evidence Walker and Wagner presented at summary judgment does not
withstand the heightened burden for common law fraud. First, Walker and Wagner did not
allege that Serven made a representation of an existing fact. Instead, they alleged that he
misrepresented his intention to create a United States entity in the future. Second, nothing in the
record established that the representations were false when made or that Serven knew that the
representations were false. When he made the representations, Serven may well have intended to
create a United States entity. Third, Walker and Wagner did not show that they had a right to
rely onwhat essentially was an " agreement -o-agree" with regard to the-issuance of stoc - m a
t
United States corporation.
Walker and Wagner failed to submit evidence sufficient to create a question of fact
regarding common law fraud, particularly under the clear, cogent and convincing standard.
Accordingly, we hold that the trial court properly granted summary judgment on Walker' s and
Wagner' s claim for common law fraud.
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No. 44063 -6 -II
We affirm.
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.
J.
MAXA, J.
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