Joseph D. Harwood v. First American Title Ins. Co. ( 2017 )

FILED
MAY 2, 2017
In the Office of the Clerk of Court
WA State Court of Appeals, Division III
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION THREE
JOSEPH D. HARWOOD, Trustee of )
MONEY TALKS TRUST; MONEY ) No. 33024-9-111
TALKS L.L.C., a Washington limited )
liability company; and C & H BFB, )
L.L.C., a Washington limited liability)
company, )
) UNPUBLISHED OPINION
Respondents, )
)
v. )
)
FIRST AMERICAN TITLE )
INSURANCE COMPANY, a foreign )
insurance company, )
)
Respondent, )
)
BEL FRANKLIN APARTMENTS LLC, a )
Washington limited liability company, )
Appellant.
FEARING, C.J. -Defendant Bel Franklin Apartments LLC appeals a trial court's
denial of a motion to compel arbitration. Because the covenants controlling the parties'
No. 33024-9-III
Harwood v. First American Title Ins. Co.
relationship direct the arbitrator to determine arbitrability, we reverse the trial court and
remand for entry of an order staying this lawsuit.
FACTS
On April 11, 2007, Bell Franklin LLC (Bell Franklin), a Washington limited
liability company formed in 2005, created a condominium association, The Bel. Joseph
Harwood then served as manager of Bell Franklin. Bell Franklin must be distinguished
from defendant Bel Franklin Apartments LLC, formed in 2008. Spokane Housing
Ventures serves as agent of Bel Franklin Apartments.
The Bel condominium association blankets a building at 225 N. Division, in
Spokane, and includes commercial space on the first level and residential units on the
upper three levels. In April 2007, Bell Franklin owned the entire building.
In April 2007, Bell Franklin recorded a "Declaration and Covenants, Conditions,
Restrictions and Reservations for The Bel, a Condominium" (covenants). Clerk's Papers
(CP) at 109. The covenants bind the entire building and individual units to be sold by
Bell Franklin. The covenants bind any person or entity who gains an interest in the
building or an individual unit.
The title for article 12 of the covenants is "Management of Condominium." CP at
53. The article contains fourteen sections named "Administration of the Condominium,"
"Management by Declarant," "Election and Approval of Board," "Management by
Board," "Authority of the Association," "Borrowing by Association," "Association
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Records and Funds," "Association as Trustee," "Common Elements, Encumbrance,"
"Termination of Contracts and Leases," "Notice and Opportunity to be Heard,"
"Acquisition of Property," "Lawsuits or Arbitration Proceedings," and "Dispute
Resolution." CP at 53-63. The section on lawsuits and arbitration proceedings addresses
the approval needed by condominium unit owners for the association to commence
litigation. The first two paragraphs of section 12.14 regarding dispute resolutions
declares:
12.14.1 Policy - Mediation. Condominium living requires that all
Unit Owners and the Association cooperate in good faith and deal fairly in
performing their duties and exercising their rights under this Declaration. If
any party to a dispute determines that the dispute cannot be resolved
without intervention, then that party shall give notice (the "Arbitration
Demand") to all other parties to the dispute and the Association demanding
that the dispute be submitted to mediation and arbitration pursuant to this
section. All parties to the dispute shall than participate in a nonbinding
mediation for 45 days after the Arbitration Demand. The mediator shall be
chosen by the Association. If the mediation is not successful, the dispute
shall be resolved by binding arbitration conducted pursuant to Section
12.14.2 below. The parties confirm that by agreeing to this alternate
dispute resolution process, they intend to give up their right to have any
dispute decided in court by a judge or jury.
12.14.2 Binding Arbitration. If binding arbitration is required to
resolve a dispute, it shall be conducted in Spokane, pursuant to RCW
7.04.060, provided, that the total award by a single arbitrator (as opposed to
a panel of three arbitrators) shall not exceed $50,000, including interest,
attorneys' fees and costs. If any party demands a total award greater than
$50,000, there shall be three (3) neutral arbitrators. If the parties cannot
agree on the selection of the arbitrator(s) within ten (10) days of the
arbitration demand, the arbitrator(s) shall be selected by the administrator
of the American Arbitration Association (AAA) office in Seattle from its
Large Complex Case Panel or from any group of arbitrators with equivalent
professional credentials as determined by the administrator. Each arbitrator
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shall be an attorney with at least fifteen (15) years' experience in
commercial or real estate law in Spokane County. The arbitrator(s) shall
determine whether the dispute is subject to binding arbitration under this
section. All statutes of limitations which would otherwise be applicable
shall apply to any arbitration proceeding hereunder.
CP at 63-64 (emphasis added).
"Compliance with Declaration" is the title to article 18 of the covenants. CP at 87.
The article reads:
18.1 Enforcement. Each Owner and the Association shall comply
strictly with the provisions of this Declaration, the Bylaws and Rules, as the
same may be lawfully amended from time to time, and with all decisions
adopted pursuant to this Declaration, the Bylaws and the Rules. Failure to
comply shall be grounds for an action to recover sums due for damages, or
injunctive relief or both, maintainable by the Board (acting through its
officers on behalf of the Owners) or by the aggrieved Owner on his own
against the party (including any Owner or the Association) failing to
comply.
18.2 No Waiver of Strict Performance. The failure of the Board in
any one or more instances to insist upon the strict performance of this
Declaration, of the Bylaws, or to exercise any right or option contained in
such documents, or to serve any notice or to institute any action, shall not
be construed as a waiver of a relinquishment for the future of such term,
covenant, condition or restriction, but such term, covenant, condition or
restriction shall remain in full force and effect. The receipt by the Board of
payment of any assessment from an Owner, with knowledge of any such
breach shall not be deemed a waiver of such breach, and no waiver by the
Board of any provision hereof shall be deemed to have been made unless
expressed in writing and signed by the Board.
CP at 87 (emphasis added).
In April 2007, Bell Franklin transferred the commercial condominium units to
Winthrop and Allison Taylor. In July 2008, Bell Franklin transferred the residential
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condominium units on the top floors to defendant Bel Franklin Apartments. Bel Franklin
Apartments intended to benefit from low-income housing tax credits by the purchase and
rentals of the condominiums.
According to plaintiff Joseph Harwood, after purchasing the upper condominiums,
Bel Franklin engaged in a series of fraudulent activities including the recording of
counterfeit covenant amendments all to the detriment of Joseph Harwood and his related
entities, C & H BFB LLC, Money Talks LLC, and Money Talks Trust. Harwood also
complains about defendant First American Title Insurance Company's participation in the
purported fraud.
PROCEDURE
On August 15, 2014, Joseph Harwood brought suit against Bel Franklin
Apartments for breach of the declarations and covenants, breach of implied covenant of
good faith and fair dealing, breach of an estoppel and stipulation agreement, and
consumer protection violations. Each claim relates to the parties' condominium interests
and dealings.
On October 3, 2014, Bel Franklin Apartments moved the trial court to dismiss the
suit and to compel arbitration. Bel Franklin Apartments argued that section 12.14 of the
Declaration and Covenants requires Joseph Harwood and his entities to arbitrate all
claims. Harwood opposed the motion by contending: (1) Section 12.14 is not a valid
arbitration provision, (2) Section 12.14 does not cover disputes other than management
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disputes, (3) Section 18.1 permits a lawsuit under these circumstances, and (4) the
Washington Condominium Act, chapter 64.34 RCW governs this dispute, and the
arbitration clause may not impact the right to sue under the act. The trial court denied the
motion to compel arbitration.
After filing this appeal, Bel Franklin Apartments, represented by legal counsel,
filed a brief asking us to reverse the trial court's denial of its motion to compel
arbitration. Joseph Harwood filed no responsive brief.
On October 5, 2016, this court scheduled resolution of the appeal by a panel
without oral argument on December 5, 2016. On December 5, 2016, this court received a
letter from Fred Peck, Executive Director of Spokane Housing Ventures, managing
member of Bel Franklin Apartments, which letter requested the court to remove the
appeal from the court calendar. Peck wrote that Bel Franklin Apartments and Joseph
Harwood sought to reach a settlement agreement. The letter informed the court that Bel
Franklin Apartments, a limited liability company, was no longer represented by legal
counsel.
On December 9, 2016, this court replied to Fred Peck's December 5 letter. The
court informed Peck that Bel Franklin Apartments' legal counsel had not filed a notice of
withdrawal and that the court considered only counsel as the spokesperson for the limited
liability company. The court also advised Peck that a licensed attorney must represent
any limited liability company engaged in litigation. The court postponed the hearing
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until February 1, 2017, for Peck and Bel Franklin Apartments' counsel to take any
needed steps. The court sent a copy of its response to all counsel of record, including Bel
Franklin Apartments' counsel.
On February 1, 2017, this court received a CR 41 motion to dismiss with a
superior court caption. We have no confirmation that anyone filed a copy of the motion
with the superior court. Joseph Harwood signed the motion as trustee on behalf of
plaintiffs Money Talks Trust and as governor on behalf of Money Talks LLC. Cory
Colvin signed the motion to dismiss as governor of C & H BFB, LLC. Nevertheless,
counsel for both Money Talks entities and for C & H BFB, LLC, has never withdrawn
from representing the plaintiffs. We proceed to the merits.
LAW AND ANALYSIS
Because Joseph Harwood failed to file a responsive brief, we must examine the
brief of Bel Franklin Apartments and the record to determine whether it has made a prima
facie showing that requires reversal. In re Marriage of Forsyth, 14 Wash. App. 909, 912,
546 P.2d 117 (1976); Aquarian Foundation v. KTVW, Inc., 11 Wn. App. 476,478, 523
P.2d 969 (1974). This court reviews de novo a trial court's decision denying a motion to
compel arbitration. Otis Housing Association, Inc. v. Ha, 165 Wash. 2d 582, 586, 201 P.3d
309 (2009).
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Usually the court determines whether an agreement to arbitrate covers a pending
controversy. Waqas Saleemi v. Doctor's Associates, Inc., 176 Wash. 2d 368, 376, 292 P.3d
108 (2013). By statute,
The court shall decide whether an agreement to arbitrate exists or a
controversy is subject to an agreement to arbitrate.
RCW 7.04A.060(2). Nevertheless, the Bell Franklin covenants' arbitration clause
contains a unique provision that assigns the issue of arbitrability to the arbitrator. Under
Washington law, despite the statute and based in part on preemptive federal law, when
the contract unmistakably assigns the question of arbitrability to the arbitrator, the
arbitrator should decide if a controversy falls within the arbitration clause's scope.
Brown v. MHN Government Services, Inc., 178 Wash. 2d 258, 264-65, 306 P.3d 948 (2013);
Gorden v. Lloyd Ward & Associates, PC, 180 Wash. App. 552, 563, 323 P.3d 1074 (2014);
Mendez v. Palm Harbor Homes, Inc., 111 Wash. App. 446, 455-56, 45 P.3d 594 (2002).
The Washington Supreme Court's decision in Satomi Owners Association v.
Satomi, LLC, 167 Wash. 2d 781, 225 P.3d 213 (2009) binds this appeal. The court enforced
a warranty provision that consigned to the arbitrators the question of whether an
arbitration clause blanketed the dispute between the parties. One of the claims asserted
by the plaintiffs fell under the Washington Condominium Act.
Bel Franklin requests this court reverse and dismiss Harwood's claims. Bel
Franklin does not cite any case supporting dismissal of the claims as opposed to staying
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i of litigation pending arbitration. Most Washington cases on a motion to compel
I arbitration are silent on the treatment of the claims on remand. E.g. Verbeek Properties,
!
LLC v. GreenCo Environmental, Inc., 159 Wash. App. 82, 93,246 P.3d 205 (2010); Canal
Station North Condominium Association v. Ballard Leary Phase IL LP, 179 Wash. App.
289, 302, 322 P.3d 1229 (2013). Since an arbitrator could rule that the controversy is not
arbitrable, we direct the trial court to stay proceedings rather than dismiss the suit. We
also note that defendant First American Title Insurance Company was not a party to the
covenants. Thus, Harwood need not arbitrate claims against First American.
CONCLUSION
We reverse the trial court's order denying the motion to compel arbitration and
remand for entry of an order staying Joseph Harwood's suit against Bel Franklin
Apartments until completion of arbitration proceedings.
A majority of the panel has determined this opinion will not be printed in the
Washington Appellate Reports, but it will be filed for public record pursuant to RCW
2.06.040.
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Fearing~,
WE CONCUR:
Lawrence-Berrey, J.
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