Christopher And Joelle Smith, Resps v. Jeanette K. Phillips, App ( 2020 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
JEANETTE K. PHILLIPS, an individual ) No. 79991-6-I
)
Appellant, ) DIVISION ONE
)
v. ) UNPUBLISHED OPINION
)
CHRISTOPHER R. SMITH and JOELLE )
R. SMITH, a married couple, )
)
Respondent. )
)
HAZELRIGG, J. — Jeanette Phillips seeks reversal of an order awarding
Christopher and Joelle Smith their attorney fees incurred in seeking release of a
lis pendens that Phillips filed after conveying real property to the Smiths in
accordance with the court’s order on summary judgment. Phillips argues that she
was substantially justified in filing the lis pendens while the appeal of the summary
judgment order was pending. Although we do not foreclose the possibility that a
lis pendens could be appropriate in a similar factual scenario, the court did not
abuse its discretion in awarding the Smiths attorney fees when Phillips did not have
a good faith belief that she retained an interest in the property. We affirm.
FACTS
The facts of the underlying dispute are detailed in this court’s decision
issued earlier this year affirming summary judgment for the Smiths. See Phillips
Citations and pinpoint citations are based on the Westlaw online version of the cited material.
No. 79991-6-I/2
v. Smith, No. 78762-4-I (Wash. Ct. App. Mar. 23, 2020) (unpublished),
http://www.courts.wa.gov/opinions/pdf/787624.pdf. In brief, Jeanette Phillips and
Christopher and Joelle Smith executed a lease agreement with option to purchase
concerning a house in Seattle that Phillips owned. Phillips, slip op. at 2, 4. The
Smiths brought suit against Phillips to enforce the purchase option. Id. at 10.
During a deposition, Phillips learned that the Smiths intended to sell the property
to a third party. The trial court granted the Smiths’ motion for summary judgment
and directed Phillips to sell her house to the Smiths in accordance with the
agreement. Id. Phillips appealed the summary judgment ruling. Id.
While the appeal was pending, Phillips requested that she be allowed to
use her equity in the property to supersede the judgment. The court instead
required Phillips to post $400,000 in cash or supersedeas bond to stay
enforcement of the judgment. On December 15, 2018, Phillips informed the
Smiths through counsel that she would not be posting the bond. Phillips’ counsel
noted that the appeal would continue even though she was unable to stay
enforcement of the judgment and that, if she prevailed on appeal, the Smiths would
“be liable to her for damages . . . equivalent to the difference between the
$700,000.00 option price and the fair market value of the House at the time of
closing.” In accordance with the superior court’s order on summary judgment,
Phillips sold the property to the Smiths by statutory warranty deed on January 24,
2019 and received nearly $500,000 in proceeds.
On January 31, 2019, Phillips recorded a lis pendens on the property. The
lis pendens stated:
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NOTICE IS HEREBY GIVEN that an action has been
instituted and is now pending in the Superior Court of the State of
Washington for King County, and is now pending in the Washington
Court of Appeals. The parties to the action have asserted conflicting
claims that affect title to [the subject property.]
....
Subsequent to the filing of this notice, all persons dealing with
the above-described real property situated in King County,
Washington will take it subject to the Defendant’s rights established
in this action.
The Smiths moved to release the lis pendens, arguing that it constituted
improper interference with their ownership rights in the property, and requested
attorney fees. The court granted the motion, finding that there was “good cause
pursuant to RCW 4.28.320 to release the post-judgment Lis Pendens filed against
the property.” The order did not address the Smiths’ request for attorney fees.
Phillips did not file a notice of appeal of this decision.
The Smiths then filed a separate motion requesting an award of their
attorney fees incurred in obtaining the release of the lis pendens, arguing that
Phillips was not substantially justified in filing the lis pendens. The Smiths initially
requested an award of $30,312.00, with the caveat that the amount would rise as
necessary to respond to any opposition to the motion. Phillips argued that the
award would be improper because she was substantially justified in filing the lis
pendens even though the court had ordered it released. In their reply, the Smiths
updated their requested amount to $32,905.50.
The court granted the motion, finding that the standard hourly rates of the
Smiths’ attorneys were reasonable, the 150% contingency fee was reasonable,
and the itemized hourly charges were reasonable and appropriate. The court
ordered that, “[b]ecause Defendant Jeannette Smith [sic] has failed to establish a
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substantial justification for filing the lis pendens, IT IS FURTHER ORDERED that
Defendant Jeanette K. Phillips pay Plaintiffs’ reasonable attorneys’ fees incurred
for having to bring Plaintiffs’ Motion for Release of Lis Pendens and the instant
motion in the amount of $21,708.00.” Phillips appealed the order granting the
Smiths’ motion for attorney fees.
ANALYSIS
I. Scope of Appeal
As an initial matter, the parties dispute the appropriate scope of our review.
“The scope of a given appeal is determined by the notice of appeal, the
assignments of error, and the substantive argumentation of the parties.” Clark
County v. W. Wash. Growth Mgmt. Hr’gs Review Bd., 177 Wash. 2d 136, 144, 298
P.3d 704 (2013). Generally, we review only the decision or parts of the decision
designated in the notice of appeal. RAP 2.4(a). A timely appeal of a trial court’s
decision on attorney fees does not bring up for review a decision entered before
the award of attorney fees unless a timely notice of appeal was filed for that
decision. RAP 2.4(b); Carrara, LLC v. Ron & E Enterprises, Inc., 137 Wash. App.
822, 825, 155 P.3d 161 (2007). Similarly, we need not review unassigned errors.
RAP 10.3(a)(4), (g) (“The appellate court will only review a claimed error which is
included in an assignment of error or clearly disclosed in the associated issue
pertaining thereto.”); Unigard Ins. Co. v. Mut. of Enumclaw Ins. Co., 160 Wash. App.
912, 922, 250 P.3d 121 (2011).
Although she argues in her briefing that the court erred in releasing the lis
pendens, Phillips’ notice of appeal did not request that this court review the trial
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court’s March 25, 2019 order releasing the lis pendens. She assigns error only to
the court’s order granting the Smiths’ motion for attorney fees. Because no timely
notice of appeal was filed for the order releasing the lis pendens, the appeal of the
attorney fee decision does not bring the prior order up for review, and Phillips did
not assign error to the release, we will not review the trial court’s March 25, 2019
order. Our review is limited to the order awarding the Smiths attorney fees.
II. Award of Attorney Fees
Phillips contends that the court erred in finding that she was not
substantially justified in filing the lis pendens and granting the Smiths’ motion for
attorney fees. Courts have discretion to award reasonable attorney fees and costs
under RCW 4.28.328(3). “A trial court abuses its discretion if its decision is
manifestly unreasonable or based on untenable grounds or untenable reasons.”
Teter v. Deck, 174 Wash. 2d 207, 215, 274 P.3d 336 (2012). Errors of law constitute
untenable reasons. Guest v. Lange, 195 Wash. App. 330, 335, 381 P.3d 130 (2016).
We may affirm a trial court order on any basis supported by the record. LaMon v.
Butler, 112 Wash. 2d 193, 200–01, 770 P.2d 1027 (1989).
A lis pendens is an “instrument having the effect of clouding the title to real
property.” RCW 4.28.328(1)(a). A plaintiff or defendant in an action affecting title
to real property may file a notice of the pendency of the action at any time after the
action has been commenced. RCW 4.28.320. This filing serves two purposes:
First, the recording of the lis pendens serves as notice to prospective
purchasers of the property that its title is subject to dispute and, thus,
that the record owner’s interest in the property is in question. Second,
the filing of a lis pendens serves to freeze the status of the property
in time—a party to the action in which the lis pendens is filed may not
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alter the outcome of the underlying action by transferring the property
to another, because the cloud on the title follows the transfer.
Snohomish Reg’l Drug Task Force v. 414 Newberg Rd., 151 Wash. App. 743, 752,
214 P.3d 928 (2009). The lis pendens constitutes constructive notice to a
subsequent purchaser that they will be bound by the proceedings following the
filing of the notice to the same extent as if they were a party to the action. RCW
4.28.320. “In Washington, lis pendens is ‘procedural only; it does not create
substantive rights in the person recording the notice.’” Beers v. Ross, 137 Wn.
App. 566, 575, 154 P.3d 277 (2007) (quoting Dunham v. Tabb, 27 Wash. App. 862,
866, 621 P.2d 179 (1980)).
A lis pendens may be cancelled under certain circumstances:
[T]he statute sets forth three conditions that must be met for the court
to cancel a lis pendens: (1) the action must be settled, discontinued,
or abated; (2) an aggrieved person must move to cancel the lis
pendens, and (3) the aggrieved person must show good cause and
provide proper notice.
Guest, 195 Wash. App. at 336 (citing RCW 4.28.320).
A claimant who files a lis pendens in an action is liable for damages to an
aggrieved party who prevails in defense of the action unless the claimant
establishes a substantial justification for the filing. RCW 4.28.328(3). A lis
pendens is substantially justified when a claimant has a reasonable, good faith
basis in fact or law for the belief that they have an interest in the property. S. Kitsap
Family Worship Ctr. v. Weir, 135 Wash. App. 900, 912, 146 P.3d 935 (2006). If they
had no substantial justification for filing the lis pendens, the claimant may also be
liable for the aggrieved party’s reasonable attorney fees and costs incurred in
defending the action. RCW 4.28.328(3). “Damages and fees are appropriate
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where the claimants provide no evidence of a legal right to the property.” S. Kitsap
Family Worship Ctr., 135 Wash. App. at 912. The fact that a court finds good cause
to cancel a lis pendens does not necessarily mean that the claimant did not have
a reasonable, good faith basis in fact or law for the belief that they had an interest
in the property at the time the lis pendens was filed.
Phillips argues that she had a good faith belief that she retained an interest
in the property because the action was still pending while on appeal. The Smiths
respond that Phillips’ failure to supersede the judgment and subsequent
conveyance of a statutory warranty deed extinguished her interest in the property.
A lis pendens and a supersedeas bond have different effects on a pending
action. A supersedeas bond prevents enforcement of certain trial court decisions
while an appeal is pending. RAP 8.1. “Any party to a review proceeding has the
right to stay enforcement of a money judgment, or a decision affecting real,
personal or intellectual property, pending review.” RAP 8.1(b). Although a lis
pendens clouds the title to real property, it does not stay enforcement of a decision
affecting real property or prevent a subsequent transfer.
“Under Washington law, a trial court judgment is presumed valid, and unless
the judgment is superseded, a judgment creditor has specific authority to execute
on that judgment.” Spahi v. Hughes-Nw., Inc., 107 Wash. App. 763, 769, 27 P.3d
1233 (2001). Generally, a party does not have a reasonable basis to believe it has
a right to a property after it conveys the property to a buyer with a statutory
warranty deed and receives valuable consideration in exchange for the
conveyance. S. Kitsap Family Worship Ctr., 135 Wash. App. at 913. The order
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granting summary judgment for the Smiths and compelling the sale of the house
is presumed valid and was not superseded, so the Smiths had the authority to
execute on that judgment. When they did so, Phillips conveyed the property to
them by statutory warranty deed in exchange for valuable consideration.
Phillips argues that, because she was unable to stay execution of the
judgment, the lis pendens was necessary to preserve her right to seek recovery of
the property if the Smiths sold it to a third party before she prevailed on appeal. If
a party has satisfied a trial court decision requiring the transfer of property that is
later modified on appeal, the trial court is ordinarily obligated to restore the property
to the appellant. RAP 12.8; Spahi, 107 Wash. App. at 770. However, if a purchaser
in good faith has acquired the property before the decision on appeal, the
purchaser’s interest “shall not be affected by the reversal or modification” of the
trial court’s decision. RAP 12.8. In this situation, the trial court shall take steps to
restore to the appellant “the value of the property, or in appropriate circumstances,
provide restitution.” Id.
Phillips bases her argument that she retained an interest in the property
while the appeal was pending primarily on an unpublished decision of this court,
Western Washington Corporation of Seventh Day Adventists v. Rasmussen, noted
at 140 Wash. App. 1020 (2007).1 This unpublished opinion, which has no
1 The Smiths request that the panel disregard Phillips’ citation to this unpublished case.
GR 14.1(a) provides that “[u]npublished opinions of the Court of Appeals have no precedential
value and are not binding upon any court.” Unpublished opinions “‘should not be cited or relied
upon in any manner,’” and courts may decline to consider cases cited in violation of this rule or
impose sanctions sua sponte against counsel. Condon v. Condon, 177 Wash. 2d 150, 166, 298 P.3d
86 (2013) (quoting Skamania County v. Woodall, 104 Wash. App. 525, 536 n. 11, 16 P.3d 701 (2001));
In re Marriage of Schnurman, 178 Wn App. 634, 645, 316 P.3d 514 (2013). Although we decline to
impose sanctions, we will disregard this unpublished case.
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precedential value under GR 14.1(a), bases its rationale largely on this court’s
statements concerning the purpose and effect of the lis pendens statute in United
Savings & Loan Bank v. Pallis, 107 Wash. App. 398, 405, 27 P.3d 629 (2001). In
United Savings & Loan, this court found that United, a third party purchaser who
acquired an interest in property covered by a lis pendens, was not a good faith
purchaser for value because the lis pendens provided constructive notice of
another’s interest in the property. Id. at 407–08. Therefore, its interest in the
property was not protected under RAP 12.8 after a ruling affecting title to the
property was reversed on appeal. Id. at 402–03, 408. This was true even though
judgment had not been superseded. Id. at 406.
More recently, in Guest v. Lange, Division Two of this court concluded that
the filing of a supersedeas bond prevents an action from being sufficiently final to
cancel a lis pendens. 195 Wash. App. at 338. The court noted that this holding
advanced the policy concerns of the lis pendens statute:
The purpose of lis pendens is to put potential purchasers on notice
of ongoing litigation so that they are aware that title may be clouded.
When a party appeals a judgment in a real property case, litigation
concerning the property is ongoing. Title to the property at issue may
be clouded pending the outcome of the appeal. For a notice of lis
pendens to protect the public as intended, it should remain in effect
until the litigation is ended.
Id. at 341 (citations omitted).
United Savings & Loan and Guest suggest that there could be a scenario in
which a lis pendens may be justified where a non-frivolous appeal is pending.
However, the circumstances here do not indicate that Phillips believed in good faith
that she retained an interest in the property. Phillips knew that the Smiths intended
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to sell the property to a third party, and her counsel acknowledged in December
2018 that her recourse on reversal of the judgment would be monetary damages.
As Phillips points out in her brief, the trial court’s order did not transfer title to the
Smiths but ordered Phillips to sell the house to the Smiths under the terms of the
option lease agreement.
Phillips completed the sale of the property to the Smiths by statutory
warranty deed in exchange for valuable consideration on January 24, 2019 and
recorded the lis pendens one week later. The court ordered that the lis pendens
be released on March 25, 2019. From the record before the court, there does not
appear to have been any change in the status of the action between the recording
of the lis pendens on January 31, 2019 and its release on March 25, 2019. Both
events took place after Phillips’ filing of the notice of appeal and after the
conveyance of the property.
Although a finding of good cause to cancel a lis pendens does not compel
the conclusion that there was no substantial justification for filing of the lis pendens,
when there is no change in the status of the action between the time the lis
pendens was filed and the time it was cancelled, this supports the conclusion that
the lis pendens was not substantially justified when filed. The court’s decision that
good cause existed to cancel the post-judgment lis pendens implied that the lis
pendens had not been filed in good faith. The record does not support Phillips’
assertion that she believed in good faith that she maintained in interest in the
property pending appeal of the summary judgment order. The court did not abuse
its discretion in granting the Smiths attorney fees under RCW 4.28.328(3).
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III. Attorney Fees on Appeal
Both parties request an award of attorney fees on appeal under RAP 18.1
and paragraph 26 of the underlying agreement between the parties. A party may
recover its reasonable attorney fees or expenses on appeal if the fees are allowed
by statute, rule, or contract and the request is made in accordance with RAP 18.1.
RAP 18.1(a); In re Guardianship of Wells, 150 Wash. App. 491, 503, 208 P.3d 1126
(2009). Paragraph 26 of the parties’ agreement provided that “‘[i]n the event this
agreement is placed in the hands of an attorney for enforcement[,] the prevailing
party shall be entitled to recover court costs and attorney fees.’” Phillips, slip op.
at 19. Each party set out its requests for an award of attorney fees in a dedicated
section of its opening brief, as required by RAP 18.1(b). Because the Smiths are
the prevailing party, they are entitled to their attorney fees on appeal under RAP
18.1 and the agreement of the parties.
Affirmed.
WE CONCUR:
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