134th Street Lofts, Llc, App v. Icap Nw Opportunity Fund, Llc, Resps ( 2020 )

Filed
Washington State
Court of Appeals
Division Two
September 29, 2020
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION II
134th STREET LOFTS, LLC, No. 52896-7-II
Appellant,
v.
iCAP NORTHWEST OPPORTUNITY FUND, UNPUBLISHED OPINION
LLC, and iCAP PACIFIC NW
MANAGEMENT, LLC,
Respondents,
and
134th STREET LOFTS II, LLC,
Nominal Third-Party
Respondent.
CRUSER, J. — 134th Street Lofts, LLC (134th Street Lofts) appeals from various orders on
partial summary judgment and summary judgment in favor of iCap Northwest Opportunity Fund
(iCap). 134th Street Lofts argues that the trial court erred in awarding attorney fees incurred by
iCap in canceling the lis pendens because the lis pendens was properly filed in an action affecting
title to real property. 134th Street Lofts also argues that the trial court improperly granted summary
judgment because iCap breached its duty of good faith and fair dealing when it failed to remove a
deed of trust on a property owned by the parties through their proxy entity.
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We hold that the trial court did not err in awarding attorney fees iCap incurred in canceling
the lis pendens because the dispute did not involve title to real property. We further hold that the
trial court properly granted summary judgment in favor of iCap because there is no genuine dispute
of material fact that iCap did not breach the duty of good faith and fair dealing,
Accordingly, we affirm.
FACTS
I. ENTITY FORMATION
On November 3, 2015, 134th Street Lofts and iCap formed an entity called “134th Street
Lofts II, LLC” (Project Entity). Clerk’s Papers (CP) at 73. The entity was created to “own, hold,
develop, and construct improvements on, sell or refinance, and otherwise deal with” real property
located in Clark County, Washington. Id. at 120. The Project Entity’s goal was to develop the
property into an apartment building. As designated by the Project Entity’s formation agreement
(LLC Agreement), 134th Street Lofts and iCap are the only managers and members of the Project
Entity.
Pursuant to the Management Services Agreement (MSA) between the Project Entity and
134th Street Lofts, 134th Street Lofts was to serve as the developer of the property. Among its
responsibilities as developer, 134th Street Lofts was required to obtain a loan on behalf of the
Project Entity, approved by the managers and members, to finance the project. Parkview Financial
Fund 2015, LP, (Parkview Financial) provided the first position construction loan to the Project
Entity, secured by the property. Under the express terms of the construction loan between the
Project Entity and Parkview Financial, no other liens or encumbrances on the property were
permitted.
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II. INITIAL DISPUTE AND JANUARY SETTLEMENT AGREEMENT
After the project was underway, a dispute arose wherein iCap alleged that 134th Street
Lofts did not complete some of its contractual obligations as a manager under the LLC Agreement
and as a developer under the MSA. On June 27, 2017, iCap filed a complaint against 134th Street
Lofts. In addition to allegations of breach of contract and tortious interference with a business
expectancy, iCap sought an injunction that would require 134th Street Lofts to cooperate in
transitioning management of the Project Entity to iCap.
Under the LLC Agreement, iCap was entitled to remove 134th Street Lofts from its position
as manager on the occurrence of a “Termination Event,” such as 134th Street Lofts’ breach of
contract. Id. at 106. The MSA also provided that following a “Termination Event,” 134th Street
Lofts would relinquish any authority to act as developer on behalf of the Project Entity. Id. at 139.
134th Street Lofts denied iCap’s allegations and raised several counterclaims, including breach of
the duty of good faith and fair dealing.
Following months of negotiations, on January 16, 2018, 134th Street Lofts and iCap
entered into a Settlement Agreement that amended both the LLC Agreement and the MSA. This
Settlement Agreement established 134th Street Lofts as the sole operating manager of the Project
Entity and developer of the property. Aside from several modifications in the Settlement
Agreement, the LLC Agreement and the MSA remained in full force and effect. 134th Street Lofts
agreed that the Project Entity would pay iCap $6,170,506.32 by June 1, 2018. The anticipated
completion date for the project was in June of 2018, and thus the property development would
either be marketable or eligible for permanent “take-out” financing at that time, enabling 134th
Street Lofts to cause the Project Entity to make this payment. Id. at 66. The Settlement Agreement
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also contained an attorney fee provision, which provided that where a party to the agreement
initiates a lawsuit to enforce its terms, the prevailing party is entitled to reasonable attorney fees
and costs.
134th Street Lofts also agreed that the Project Entity would execute a promissory note in
favor of iCap for $1,850,000, secured by a deed of trust against the property and payable to iCap
by October 1, 2018. iCap agreed that the deed of trust was subordinate to the senior Parkview
Financial loan that had previously been secured against the property. iCap recorded the deed of
trust with the Clark County Auditor.
In entering the Settlement Agreement, neither party anticipated that Parkview Financial
would object to iCap’s subordinate and subsequent lien on the property. But when Parkview
Financial learned that iCap had a second lien secured against the property, it refused to release
further funds for construction of the project unless iCap removed its deed of trust. 134th Street
Lofts immediately asked that iCap remove its deed of trust, but iCap did not do so until
approximately three weeks after 134th Street Lofts’ request.
In the several weeks that elapsed before iCap removed its deed of trust and Parkview
Financial disbursed funds, contractors were not paid for their work and left the job site. By the
time the funds were made available, the cost of restarting work and completing the job had
substantially increased. As a result, the project was further delayed, and the delay prevented 134th
Street Lofts from adhering to contractual budget and schedule requirements and from timely
making the $6.1 million payment to iCap required under the Settlement Agreement.
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III. CURRENT LAWSUIT AND LIS PENDENS ACTION
After an unsuccessful attempt at negotiating an amendment to the prior Settlement
Agreement, iCap sent 134th Street Lofts a notice of default and termination. iCap also asserted its
right under the Settlement Agreement to assume management of the Project Entity and to terminate
134th Street Lofts as developer due to the occurrence of a Termination Event.
134th Street Lofts filed a lawsuit against iCap, alleging that iCap breached its contract by
violating its duty of good faith and fair dealing and by failing to remove the deed of trust on the
property for several weeks after Parkview Financial notified the Project Entity that it would
withhold further disbursement of construction loan funds. In addition, 134th Street Lofts sought
declaratory relief asking that the trial court order iCap to grant 134th Street Lofts an eight-month
extension on its project completion and payment deadlines. 134th Street Lofts also sought
injunctive relief, asking that the trial court restrain iCap from assuming control over the Project
Entity unless iCap could demonstrate that it could procure the funding needed to complete the
project.
Shortly after filing the complaint, 134th Street Lofts recorded a lis pendens on the property
in Clark County. iCap was in the process of replacing the Parkview Financial loan with a loan
from a different lender, but the new lender declined to close the loan while the property was
encumbered by the lis pendens. The new loan was scheduled to close when the final payment on
the Parkview Financial loan was due, but because the new loan did not close as anticipated, iCap
had to arrange for an emergency extension on the payment with Parkview Financial to avoid
default and foreclosure on the property. iCap was required to pay just under $140,000 in fees to
procure a one-month extension from Parkview Financial.
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IV. PROCEDURAL HISTORY
iCap moved to cancel the lis pendens, arguing that the lis pendens was improper because
134th Street Lofts’ claims did not affect title to real property. The trial court granted iCap’s motion
and canceled the lis pendens. The trial court also informed iCap that it had the right to move for
damages, and costs and fees pursuant to RCW 4.28.328.
Shortly thereafter, iCap moved for partial summary judgment, arguing that it did not breach
the duty of good faith and fair dealing because it was entitled to maintain a deed of trust on the
property under the Settlement Agreement. The trial court granted iCap’s motion for summary
judgment and dismissed 134th Street Lofts’ claims. The trial court ruled that iCap was entitled to
move for attorney fees and costs as the prevailing party pursuant to a provision in the parties’
Settlement Agreement.
iCap subsequently filed a motion for summary judgment on damages and fees related to
the lis pendens, a motion for summary judgment regarding 134th Street Lofts’ liability for breach
of contract resulting from 134th Street Lofts’ failure to adhere to its repayment and development
schedules under the Settlement Agreement, and a motion for fees and costs as the prevailing party.
The trial court granted iCap’s motions for summary judgment and entered a judgment ordering
that 134th Street Lofts pay iCap the principal sum of $139,977.42 under RCW 4.28.328(2) for
wrongful recordation of the lis pendens. In addition, the trial court awarded iCap $41,624.43 in
attorney fees and costs, of which $13,847 was awarded pursuant to RCW 4.28.328(2) for wrongful
recordation of the lis pendens, and the remainder was awarded as reasonable fees and costs
pursuant to the parties’ Settlement Agreement.
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134th Street Lofts appeals the order granting partial summary judgment, the order granting
summary judgment on damages and fees related to the lis pendens, and the order granting iCap’s
motion for summary judgment on 134th Street Lofts’ liability for breaching the Settlement
Agreement.
DISCUSSION
I. ATTORNEY FEES FOR WRONGFUL RECORDATION OF LIS PENDENS
A. LEGAL PRINCIPLES
Under RCW 4.28.320, a party in an action affecting title to real property may file a notice,
or lis pendens, with the county auditor regarding the pendency of the action. Pendergrast v.
Matichuk, 189 Wash. App. 854, 867, 355 P.3d 1210 (2015). Filing a lis pendens serves two purposes.
Snohomish Reg’l Drug Task Force v. 414 Newberg Rd., 151 Wash. App. 743, 752, 214 P.3d 928
(2009). First, once a lis pendens is recorded, prospective purchasers and encumbrancers have
constructive notice that title to the property is in dispute and that the record owner’s interest is in
question. Id. Second, on filing, the lis pendens “freeze[s] the status of the property in time,”
preventing a party to the underlying action from transferring their interest “because the cloud on
the title follows the transfer.” Id. As a result, once the lis pendens is recorded, any person or entity
that subsequently acquires an interest in the property does so “subject to the property’s ultimate
disposition in the pending suit as that suit was filed.” Id.
RCW 4.28.328(2) provides,
A claimant in an action not affecting the title to real property against which
the lis pendens was filed is liable to an aggrieved party who prevails on a motion
to cancel the lis pendens, for actual damages caused by filing the lis pendens, and
for reasonable attorneys’ fees incurred in canceling the lis pendens.
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RCW 4.28.328(3) presents an alternative means for recovering damages and attorney fees
resulting from the filing of a lis pendens. This statute provides,
Unless the claimant establishes a substantial justification for filing the lis
pendens, a claimant is liable to an aggrieved party who prevails in defense of the
action in which the lis pendens was filed for actual damages caused by filing the lis
pendens, and in the court’s discretion, reasonable attorneys’ fees and costs incurred
in defending the action.
RCW 4.28.328(3).
Washington courts have not established specific guiding criteria to aid in determining
whether an action “affects title to real property” under RCW 4.28.328(2). However, in a case
involving a lis pendens filed in an easement dispute, this court relied on persuasive authority from
Arizona, which has a similar lis pendens law. Schwab v. Seattle, 64 Wash. App. 742, 748, 826 P.2d
1089 (1992). Arizona courts also consider whether the action affects title to real property when
determining whether a lis pendens was wrongfully recorded. Santa Fe Ridge Homeowners’ Ass’n
v. Bartschi, 219 Ariz. 391, 395-96, 199 P.3d 646 (Ct. App. 2008).
In Schawb, this court adopted the Arizona courts’ construction of Arizona’s lis pendens
law that considers an action affecting title to real property one that “involv[es] an adjudication of
rights incident to title to real property.” 64 Wash. App. at 748 (citing Tucson Estates, Inc. v. Superior
Court, 151 Ariz. 600, 729 P.2d 954, 959 (Ct. App. 1986)). Applying this construction, this court
held that an easement which grants a property owner a right to access another property is an action
affecting a right incident to title. Id. at 749.
“[A] lawsuit affects a right incident to title if any judgment would expand, restrict, or
burden a property owner’s rights as bestowed by virtue of that title.” Santa Fe Ridge Homeowners’
Ass’n, 219 Ariz. at 396. Arizona courts have considered whether the judgment involved in a lawsuit
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would bind future owners of the property or govern rights tied to ownership of the property. Id. at
397; see also Tucson Estates, 729 P.2d at 959 (holding that a lawsuit regarding an implied
restrictive covenant pertaining to use of a golf course by mobile home residents implicated rights
incident to title because determination of the dispute in favor of the residents would create a right
to use the golf course that arose from ownership of the mobile home lots).
B. ANALYSIS
134th Street Lofts argues that the trial court wrongfully imposed attorney fees under RCW
4.28.328(2) because the action affects title to real property. 134th Street Lofts claims that title to
real property is implicated in this case because the dispute involved control over the Project Entity,
and the Project Entity has the “legal right to transfer, encumber, or enact any other title action for
a property.” Br. of Appellant at 11. 134th Street Lofts specifically limits its assignment of error to
the trial court’s imposition of $13,847 in attorney fees incurred by iCap in canceling the lis
pendens. 134th Street Lofts does not also assign error to the trial court’s imposition of nearly
$140,000 in damages incurred as a result of the wrongful recordation of the lis pendens. 1
iCap contends that 134th Street Lofts misapprehends the trial court’s ruling and the
distinction between RCW 4.28.328(3) and RCW 4.28.328(2). iCap asserts that 134th Street Lofts’
argument is premised on whether it had substantial justification for filing the lis pendens, which
1
Although 134th Street Lofts appeals from the trial court’s order granting summary judgment on
damages and fees related to the lis pendens, which includes both the $140,000 award for damages
and $13,847 for attorney fees, it does not assign error or otherwise argue that the $140,000 award
for damages was improperly awarded. If 134th Street Lofts prevailed on its theory that it did not
wrongfully record the lis pendens, then the trial court would have also erred in imposing $140,000
in damages under the same statute for the same reason. It is not clear why 134th Street Lofts limited
its assignment of error to the imposition of attorney fees.
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would only be relevant if the trial court awarded fees under RCW 4.28.328(3). However, as iCap
points out, the trial court actually awarded fees under RCW 4.28.328(2). Thus, the relevant
question is whether the trial court properly imposed attorney fees under RCW 4.28.328(2).
iCap defends the trial court’s decision to impose damages and attorney fees because title
to the property was not at issue. iCap asserts that there is a critical distinction between control over
the entity and title to the property, and that even if 134th Street Lofts was removed as manager and
developer, 134th Street Lofts remained a member of the Project Entity as provided by the LLC
Agreement and was still entitled to share in the proceeds of the development as a member.
134th Street Lofts’ claim fails because regardless of the outcome of the lawsuit pertaining
to management of the Project Entity, the Project Entity’s rights as title owner are unaffected, and
this action does not affect title to real property. That is, the trial court’s judgment regarding whether
134th Street Lofts could continue to act as a manager and developer on behalf of the Project Entity
would not result in expanding, restricting, or burdening the Project Entity’s rights to the property
“as bestowed by virtue of that title.” Santa Fe Ridge Homeowners’ Ass’n, 219 Ariz. at 396. The
trial court’s judgement does not bind future owners of the property, nor does it govern rights that
are tied intrinsically to ownership of the property itself. See id.
134th Street Lofts’ argument that the dispute in the underlying lawsuit affects title to real
property because it concerns “the legal right to transfer, encumber, or enact any other title action
for the property” (Br. of Appellant at 11) fails when considered in light of the purpose for filing a
lis pendens. A party files a lis pendens to provide notice to prospective purchasers and
encumbrancers of the property that the scope of the interest they intend to acquire or encumber is
not settled and may change depending on ultimate disposition of the lawsuit. Snohomish Reg’l
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Drug Task Force, 151 Wash. App. at 752. This makes sense, given that “[a] grantor of property can
convey no greater title or interest than the grantor has in the property.” Firth v. Lu, 146 Wash. 2d
608, 615, 49 P.3d 117 (2002).
Here, the Project Entity owns the property, and thus the Project Entity, not iCap or 134th
Street Lofts, sells, refinances, or otherwise conveys the property. The manager merely acts as an
agent on behalf of the Project Entity, with decision-making authority to bind the Project Entity and
exercise the powers of the Project Entity. Regardless of which entity, iCap or 134th Street Lofts,
acts as manager and makes the decision to convey the property, the actual interest conveyed is
unaffected by the identity of the decision-maker. There is no reason to notify prospective
purchasers or encumbrancers when the identity of the agent changes because the record owner of
the property remains the same and has the same interest to convey.
Accordingly, the action does not affect title to real property and the trial court properly
awarded iCap attorney fees incurred in canceling the lis pendens pursuant to RCW 4.28.328(2).
II. THE IMPLIED DUTY OF GOOD FAITH AND FAIR DEALING
A. SUMMARY JUDGMENT STANDARD
We review an order granting summary judgment de novo and consider all the evidence and
reasonable inferences drawn from the evidence in the light most favorable to the nonmoving party.
Keck v. Collins, 184 Wash. 2d 358, 370, 357 P.3d 1080 (2015). Summary judgment is appropriate
where no genuine issue of material fact exists, and the moving party is entitled to judgment as a
matter of law. Id. “‘A material fact is one that affects the outcome of the litigation.’” Morgan v.
Kingen, 166 Wash. 2d 526, 533, 210 P.3d 995 (2009) (quoting Owen v. Burlington N. & Santa Fe
R.R., 153 Wash. 2d 780, 789, 108 P.3d 1220 (2005)).
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B. LEGAL PRINCIPLES
An implied duty of good faith and fair dealing exists in every contract. Rekhter v. Dep’t of
Soc. & Health Servs., 180 Wash. 2d 102, 112, 323 P.3d 1036 (2014). This duty obligates both parties
to a contract to cooperate with one another so that each party may obtain the full benefit of
performance. Id. It compels the parties to a contract to maintain “‘faithfulness to an agreed
common purpose and consistency with the justified expectations of the other party.’” Edmonson
v. Popchoi, 172 Wash. 2d 272, 280, 256 P.3d 1223 (2011) (quoting RESTATEMENT (SECOND) OF
CONTRACTS § 205 cmt. a (AM. LAW INST. 1981)).
The duty of good faith and fair dealing does not impose a “free-floating obligation” on the
parties to a contract. Rekhter, 180 Wash. 2d at 113. Instead, the duty must arise “‘in relation to
performance of a specific contract term.’” Keystone Land & Dev. Co., v. Xerox Corp., 152 Wash. 2d
171, 177, 94 P.3d 945 (2004) (quoting Badgett v. Security State Bank, 116 Wash. 2d 563, 570, 807
P.2d 356 (1991)). This duty cannot add or contradict a contract’s express terms. Rekhter, 180
Wash. 2d at 113. Consequently, a party is not obligated to accept a material change to the terms of
its contract to avoid breach. Badgett, 116 Wash. 2d at 569. A party does not breach the duty of good
faith when it “simply stands on its rights to require performance of a contract according to its
terms.” Id. at 570.
In interpreting contractual provisions, Washington courts follow the “objective
manifestation theory of contracts.” Hearst Commc’ns Inc., v. Seattle Times Co., 154 Wash. 2d 493,
503, 115 P.3d 262 (2005). This approach requires courts construing contractual provisions to
determine the parties’ intent by focusing on their “objective manifestations of the agreement”
corresponding with the “reasonable meaning of the words used.” Id. at 503. The unexpressed,
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subjective intent of the parties in entering the agreement “is generally irrelevant if the intent can
be determined from the actual words used.” Id. at 504. Unless clearly designated otherwise, words
in a contract are given their “ordinary, usual, and popular meaning.” Id.
C. ANALYSIS
134th Street Lofts argues that summary judgment was improper because iCap breached the
duty of good faith and fair dealing, preventing each party from enjoying the benefit of
performance, when iCap did not remove the deed of trust it held on the property immediately upon
134th Street Lofts’ request. 134th Street Lofts asserts that once Parkview Financial indicated that
it would withhold further disbursement of funds, both 134th Street Lofts and iCap had new
responsibilities arising pursuant to the duty of good faith and fair dealing to timely get the project
on track. 134th Street Lofts acknowledges that it had a responsibility to obtain new financing that
would not conflict with iCap’s deed of trust, but it claims iCap had a concomitant duty to remove
the deed of trust while 134th Street Lofts secured a new construction loan.
134th Street Lofts contends that iCap’s delay of three weeks constituted a breach of the
duty of good faith and fair dealing because although the payment secured by the deed of trust was
not due to iCap for many months, 134th Street Lofts required funding immediately in order to pay
sub-contractors and purchase supplies. By failing to timely remove the deed of trust, 134th Street
Lofts contends, iCap undermined the Project Entity’s ability to adhere to the development
schedule, breaching Settlement Agreement terms and the duty of good faith and fair dealing arising
from those terms.
iCap responds that the trial court properly granted summary judgment because iCap did
not breach the implied duty of good faith and fair dealing when it waited three weeks to remove
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the deed of trust against the property. iCap contends that 134th Street Lofts’ claim improperly
imposes a free-floating duty of good faith and fair dealing that was not attached to any term in the
Settlement Agreement. iCap further argues that it did not have a duty of good faith and fair dealing
that required it to forfeit an express right guaranteed under the Settlement Agreement.
iCap was entitled to summary judgment because 134th Street Lofts’ framing of iCap’s duty
in this case improperly (1) imposes a material change to existing terms in the Settlement
Agreement and (2) creates new obligations beyond those contained in the contract. Consequently,
because 134th Street Lofts cannot show that it was denied the benefit of iCap’s performance under
the existing agreement, iCap did not breach the implied duty of good faith and fair dealing.
Here, iCap did not breach the implied duty of good faith and fair dealing as alleged by
134th Street Lofts because it was entitled to encumber the property with the deed of trust under
the express terms of its Settlement Agreement. iCap was not required to accept a material change
to the terms of its contract to fulfill its obligation to act in good faith. See Badgett, 116 Wash. 2d at
569. “As a matter of law, there cannot be a breach of the duty of good faith when a party simply
stands on its rights to require performance of a contract according to its terms.” Id. at 570. But
134th Street Lofts argues that iCap had a duty to immediately forfeit its contractual right to secure
the promissory note until 134th Street Lofts was able to procure alternate financing that would
permit an additional encumbrance on the property. In effect, 134th Street Lofts suggests that iCap
was compelled to quickly accept a worse position than it bargained for, and that both parties had
agreed to, because the three-week delay in removing the deed of trust prevented 134th Street Lofts
from meeting its own contractual obligations. This position is untenable because the duty of good
faith and fair dealing cannot contradict express terms in a contract. Rekhter, 180 Wash. 2d at 113.
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Moreover, iCap did not breach its duty of good faith and fair dealing because there was no
contract term obligating the specific performance that 134th Street Lofts asserts iCap did not carry
out in good faith. 134th Street Lofts’ claim fails because the duty of good faith and fair dealing is
derivative rather than free-standing; it must arise in relation to a party’s performance of its
contractual obligations. Badgett, 116 Wash. 2d at 569. Although 134th Street Lofts asserts that iCap’s
obligations to act in good faith by immediately removing the deed of trust comes from paragraphs
6(b) and 16 of the Settlement Agreement, it interprets these contractual provisions in a manner that
expands the scope of their plain meaning. This argument fails because neither term creates the
obligation suggested by 134th Street Lofts.
First, paragraph 6(b) of the Settlement Agreement describes the procedures for requesting
draws of construction loan funds, and it requires both 134th Street Lofts and iCap to agree to the
draw request. This provision states that iCap shall review draw requests submitted by 134th Street
Lofts within two days of receiving them, and that it should not unreasonably withhold, delay, or
condition its approval of the draw requests. 134th Street Lofts interprets this provision to require
“immediate action on funding concerns” (Br. of Appellant at 13), but this reading of the contract
provision is overbroad. This provision does not compel iCap to forgo rights secured under the
Settlement Agreement in the event that the lender declines to disburse funds. Nor does this case
involve an allegation that iCap failed to act in good faith because it withheld, delayed, or
conditioned its approval of 134th Street Lofts’ request to draw funds from the construction loan.
This paragraph, therefore, cannot be construed to give rise to iCap’s good faith duty to remove the
deed of trust immediately on request.
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Next, paragraph 16 of the Settlement Agreement contains a general “[f]urther [a]ssurances”
clause, which provides that the parties agree to execute any further documents or take further
actions “as may be reasonable and appropriate in order to carry out the purpose and intent of this
agreement.” CP at 166. Applying the objective manifestation approach to contract interpretation,
the plain language of this paragraph indicates that the parties meant it to serve as a catch-all
provision providing for both parties’ continued adherence toward carrying out the objective of
their agreement. See Hearst, 154 Wash. 2d at 504. In paragraph 8, the Settlement Agreement
expressly provides for creation of a promissory note, secured by the deed of trust. Therefore,
securing the promissory note in favor of iCap with a deed of trust constitutes one goal inherent to
the Settlement Agreement. Nothing in the plain language of paragraph 16 indicates that by
requiring the parties to take reasonable and appropriate further actions as may be necessary, the
parties intended that provision to compel either party to immediately forfeit rights guaranteed by
other express terms.
The implied duty of good faith and fair dealing protects a party’s justified expectations in
entering the agreement. Edmonson, 172 Wash. 2d at 280. It exists to ensure that the parties receive
the full benefit of performance as provided by the contract. Rekhter, 180 Wash. 2d at 112. But here,
134th Street Lofts could not fairly expect, in entering the Settlement Agreement, that iCap should
swiftly accept a substantial reduction in its rights under the contract with no return benefit. Nor
does the record reflect that iCap engaged in any action that deprived 134th Street Lofts of the full
benefit of iCap’s performance of its obligations under the Settlement Agreement. Taken together,
there is no evidence that iCap violated its duty of good faith and fair dealing and iCap was entitled
to summary judgment as a matter of law.
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ATTORNEY FEES
iCap requests attorney fees on appeal under RAP 18.1(a). It claims that it is entitled to fees
under RCW 4.28.328, RCW 4.84.330, and section 23 of its Settlement Agreement.
iCap was awarded fees by the trial court under RCW 4.28.328(2), which provides
reasonable attorney’s fees incurred in canceling a lis pendens. This court was not involved in
canceling the lis pendens, but only reviewed the trial court’s decision to award fees pursuant to
this statute. We decline to award any additional fees on appeal under this statute.
For any action on a contract,
where such contract . . . 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.
RCW 4.84.330. Section 23 of the Settlement Agreement provides for attorney fees and costs and
states that “should a Party initiate litigation to enforce the terms of this Agreement, the prevailing
party shall be entitled to its reasonable attorney fees and costs.” CP at 168.
In filing the lawsuit against iCap, 134th Street Lofts sought damages for iCap’s alleged
breach of the duty of good faith and fair dealing. This type of claim necessarily arises from a
contract and therefore constitutes litigation initiated to enforce the terms of an agreement within
the meaning of RCW 4.84.330. We therefore award reasonable attorney fees in favor of iCap in
an amount to be determined by the commissioner of this court.
CONCLUSION
We hold that the trial court did not err in awarding iCap attorney fees incurred in canceling
the lis pendens because the action did not affect title to real property. We also hold that iCap was
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entitled to summary judgment because there was no genuine dispute of material fact that iCap did
not breach the duty of good faith and fair dealing when it waited three weeks before removing the
deed of trust. We grant iCap’s request for attorney fees on appeal.
Accordingly, 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.
CRUSER, J.
We concur:
LEE, C.J.
GLASGOW, J.
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