Bart Klein & Gorliz Amiri, App/cr-resps v. Maisie Bieret Delgado & Javier F.delgado, Resp/cr-apps ( 2014 )

138 Wn. App. 427, 432 n.2, 157 P.3d 879 (2007); Mueller v.
Miller, 82 Wn. App. 236, 246, 917 P.2d 604 (1996). The CR 12(b) motion was
not, therefore, converted into a motion for summary judgment, and we review the
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trial court's decision according to the standards applicable to motions on the
pleadings.
We apply a de novo standard of review to a superior court's decision to
dismiss under CR 12(b)(6). Kinney v. Cook, 159 Wn.2d 837, 842, 154 P.3d 206(2007). Dismissal under CR 12(b)(6) is appropriate in those cases where the
plaintiff cannot prove any set of facts, consistent with the complaint, that would
entitle the plaintiff to relief. Bravo v. DolsenCos., 125 Wn.2d 745, 750, 888 P.2d
147 (1995). The purpose of CR 12(b)(6) is to weed out complaints where, even if
that which the plaintiff alleges is true, the law does not provide a remedy.
McCurrv v. Chew Chase Bank, FSB, 169Wn.2d96, 101, 233 P.3d 861 (2010).
Such motions should generally be granted "only in the unusual case in which the
plaintiff's allegations show on the face of the complaint an insuperable bar to
relief." San Juan County v. No New Gas Tax, 160 Wn.2d 141, 164, 157 P.3d
831 (2007).
Under notice pleading standards, a complaint need contain only "(1) a
short and plain statement of the claim showing that the pleader is entitled to relief
and (2) a demand for judgment for the relief to which he deems himself entitled."
CR 8(a). "Under notice pleading, plaintiffs use the discovery process to uncover
the evidence necessary to pursue their claims." Putman v. Wenatchee Valley
Med. Ctr., PS, 166 Wn.2d 974, 983, 216 P.3d 374 (2009).
Maisie contends that Klein's complaint is both legally and factually
insufficient. She argues that the complaint is incorrect as a matter of law
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because it asserts that any transfer of assets by a judgment debtor violates the
Uniform Fraudulent Transfer Act. She further argues that the complaint fails as a
factual matter because it does not identify a specific transfer of assets.
According to Maisie, the only factual scenario Klein could potentially prove that is
consistent with and supported by the complaint is that she has been living at
Javier's home for little or no rent. She points out that this arrangement does not
amount to a transfer of assets from the judgment debtor, fraudulent or otherwise.
Under Washington's statute that regulates fraudulent transfers, chapter
19.40 RCW, a fraudulent transfer occurs
where one entity transfers an asset to another entity, with the effect
of placing the asset out of the reach of a creditor, with either the
intent to delay or hinder the creditor or with the effect of insolvency
on the part of the transferring entity.
Thompson v. Hanson, 168 Wn.2d 738, 744, 239 P.3d 537 (2009). To prevail in
the action, Klein will have to establish that Maisie transferred assets to Javier
with actual intent to hinder Klein's ability to collect his judgment, or that Maisie
transferred assets for less than reasonably equivalent value while insolvent.
RCW 19.40.041(a)(1); (a)(2); .051 (a); Sedwick v. Gwinn, 73 Wn. App. 879, 885,
873 P.2d 528 (1994).
Klein's complaint alleged that "Maisie Delgado's transfer of assets,
including payment of money, to Defendant Javier Delgado, is a violation of the
Uniform Fraudulent Transfer Act, RCW 19.40.041, as an attempt to hinder, delay,
or defraud a creditor." This statement can fairly be read as a claim that Maisie
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transferred assets to Javier and did so with intent to hinder, delay, or defraud
Klein, the judgment creditor.
Under the generous standard of CR 12(b)(6), "'[a]ny hypothetical situation
conceivably raised by the complaint defeats a CR 12(b)(6) motion if it is legally
sufficient to support the plaintiff's claim.'" Bravo, 125 Wn.2d at 750, quoting
Halvorson v. Dahl, 89 Wn.2d 673, 674, 574 P.2d 1190 (1978). We reject the
notion that the complaint supports only one conceivable set of facts and that
those facts do not involve any transfer of assets. Klein is not alleging that Maisie
is violating the statute by living at Javier's house rent-free. It is clear from the
complaint that Klein intends to establish that Maisie provided funds to Javier and
those funds were used "for the purchase and ongoing mortgage obligations of
the home titled in the name of Defendant Javier Delgado." The lawsuit expressly
concerns Javier's real property located in King County and the source of funds
used to purchase and pay the mortgage on that property.
Maisie argues that Klein's complaint, if legally sufficient, is time barred
under RCW 19.40.091(a) because, assuming the alleged transfer involves funds
used to purchase Javier's home, that transaction occurred in October 2006, more
than four years before Klein filed his lawsuit. Maisie also maintains that
dismissal was proper because Klein failed to specifically plead all elements of
fraud as required by CR 9(b).
Maisie failed to raise either of these issues in her motion to dismiss. Even
in the context of a CR 12(b)(6) motion, a litigant may not raise legal issues on
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appeal after failing to do so in a timely manner in the lower court. RAP 2.5(a);
Karlberq v. Often, 167 Wn. App. 522, 531, 280 P.3d 1123 (2012) (failure to
preserve a claim of error generally waives appellate review). But even if Maisie
had timely asserted these grounds, neither amounts to an insuperable bar to
relief. Klein's complaint does not allege that Maisie transferred funds on a
specific date. Conceivably, he could prove that Maisie transferred assets within
four years prior to the date he filed his complaint or that he filed his complaint
within one year of the date he discovered, or could have reasonably discovered,
that the fraudulent transfer occurred. See RCW 19.40.091(a). And while CR
9(b) requires that the elements of fraud must be pleaded with particularity in a
complaint alleging common law fraud, Maisie offers no authority requiring these
elements to be specifically pleaded in a complaint alleging a violation of RCW
19.40.041.3 See Haberman v. Wash. Pub. Power Supply Svs., 109Wn.2d 107,
165, 744 P.2d 1032, 750 P.2d 254 (1987) (complaint alleging common law fraud
must include both elements and circumstances of fraudulent conduct).
Because there are hypothetical sets of facts consistent with his complaint
that could support Klein's claim for relief under RCW 19.40.041, dismissal under
CR 12(b)(6) was error.
3 The elements of the common law fraud include:
(1) representation of an existing fact; (2) materiality; (3) falsity; (4) the
speaker's knowledge of its falsity; (5) intent of the speaker that it should
be acted upon by the plaintiff; (6) plaintiff's ignorance of its falsity; (7)
plaintiff's reliance on the truth of the representation; (8) plaintiff's right to
rely upon it; and (9) damages suffered by the plaintiff.
Stilev v. Block, 130 Wn.2d 486, 505, 925 P.2d 194 (1996).
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MOTION TO DISQUALIFY COUNSEL
Klein challenges the trial court's ruling disqualifying his counsel. It is
undisputed that Klein's attorney, Kerl, represented Maisie as a Rule 9 intern.
Therefore, Rule of Professional Conduct (RPC) 1.9 concerning duties owed to
former clients applied. Under that rule, a lawyer may not represent another
person in the same or a substantially related matter if that person's interests are
materially adverse to the interests of a former client. Matters are substantially
related when the factual matter in the former representation is so similar to a
material factual matter in the current representation that a lawyer would consider
the past representation useful in advancing the interests of the current client.
State v. Hunsaker, 74 Wn. App. 38, 44, 873 P.2d 540 (1994). Matters are also
substantially related if there is a substantial risk that confidential factual
information that would normally have been obtained in the prior representation
would materially advance the client's position in the subsequent matter. RPC 1.9
cmt. 3.
Klein points out that the dissolution was uncontested and involved limited
court proceedings. Still, it is conceivable that information Kerl learned about
Maisie's finances and her relationship with Javier in the course of the
representation would be beneficial to Klein's position in the current lawsuit.
Under these circumstances, we cannot say that the court abused its discretion in
granting Maisie's motion to disqualify counsel. Pub. Util. Dist. No. 1 of Klickitat
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County v. Int'l Ins. Co., 124 Wn.2d 789, 811-12, 881 P.2d 1020 (1994) (whether
to grant a motion to disqualify counsel reviewed for abuse of discretion).4
SANCTIONS
Maisie has filed a cross appeal, arguing that once the trial court dismissed
the complaint, it should have reinstated the sanctions initially imposed. The
determination of a violation of CR 11 is within the sound discretion of the trial
court. Wash. State Physicians Ins. Exch. & Ass'n v. Fisons Corp., 122Wn.2d
299, 338, 858 P.2d 1054 (1993). The fact that a party's action fails on the merits
is by no means dispositive one way or the other on the question of whether CR
11 sanctions are appropriate, but in light of our conclusion here that the court
erred in dismissing the complaint, there is no basis to disturb the decision to deny
sanctions. See Bryant v. Joseph Tree. Inc.. 119 Wn.2d 210, 220, 829 P.2d 1099(1992).
ATTORNEY FEES ON APPEAL
To the extent that both Klein and Maisie request attorney fees on appeal,
neither party provides meaningful argument or citation to authority showing their
entitlement to attorney fees. They fail to comply with the requirements of RAP
18.1, and we reject both parties' requests.
4As a practical matter, there is no indication that Kerl possessed any information
that Klein himself did not possess. But because Klein is acting pro se, RPC 1.9 does not
apply to prohibit him from pursuing his own claim against his former client.
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Reversed and remanded.
Qa^te^
WE CONCUR:
MM i %
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