Jeffrey Haley, App/cross-resp v. Kathleen Hume, Et Ano., Resps/cross-app

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
JEFFREY HALEY, an individual, ) No. 77769-6-I
Appellant,
) DIVISION ONE
v.
KATHLEEN HUME, an individual; and ) PUBLISHED OPINION
FIRST AMERICAN TITLE INSURANCE )
COMPANY, formerly known as Pacific )
Northwest Title Company, ) FILED: September 9, 2019
)
Respondent.
MANN, A.C.J. — Jeffrey Haley appeals the trial court’s summary judgment
dismissal of his claim that Kathleen Hume violated their statutory warranty deed by
abandoning an easement prior to selling her property to Haley. Haley also appeals the
trial court’s summary judgment dismissal of his claim against First American Title
Insurance Company (First American) for failing to defend.
Because the statute of limitations has run on Haley’s warranty claims, the trial
court correctly dismissed Haley’s claims against Hume. Because general exception 3 in
the title insurance policy applies, the trial court also correctly dismissed Haley’s claims
No. 77769-6-1/2
against First American. Finally, the trial court did not err in denying Hume’s motion for
an award of attorney fees and sanctions. We affirm.
This case concerns Lot B of Mercer Island Short Plat No. MI-78-4-018, and an
easement located on the adjacent open space Tract A. At issue is the 2005 sale of Lot
B by Hume to Haley, and specifically whether Haley purchased the right to ingress,
egress, and park, on the easement in Tract A. The following is a not-to-scale
representation of the properties at issue.
_________________________ Tract A
Easement
NI
‘r lotD
LotB _________________________
I
‘I
LotC
In 1979, the owner of Tract A granted a 10-foot-wide and 140-foot long easement
along the southern edge of Tract A to the owners of Lot B for utilities, vehicular and
pedestrian ingress and egress, and parking. The easement was necessary to provide
access over a paved road on Tract A to Lots C and D. Persons accessing Lots C and D
would cut across the Lot B driveway and proceed on the paved access road on Tract A
to reach their properties.
On September 6, 2000, Hume purchased Lot B. In 2001, John Pugh purchased
Lot D and Tract A. In 2001, Pugh applied for a variance and permit from the City of
Mercer Island to remove approximately 95 linear feet of the underground culvert on
-2-
No. 77769-6-1/3
Tract A and expose, or daylight, that portion of the stream connecting to Lake
Washington. The application also sought to remove the entire access driveway in the
easement area on Tract A and to install a new driveway access serving Lots C and D
on the north side of Tract A. The new driveway was located outside of the required 75-
foot stream setback and included a bridge over the open stream. The plans included
significant landscaping improvements, shade trees, and an 18-inch high rockery along
the sides of the stream channel.
At the same time, Pugh approached Hume with his proposed plan for
improvements on Tract A. Hume agreed to Pugh’s plan because it eliminated the need
for vehicles and pedestrians to cut across her driveway. Hume also believed that
Pugh’s plan created additional privacy and safety to her property, was a visual
improvement, and added value to her home. Hume agreed to abandon a portion of the
easement in Tract A.
After the City of Mercer Island approved Pugh’s variance and permit, he removed
the paved access road on Tract A, opened the culvert to create an open stream with an
18-inch high rockery along the sides of the channel, and planted trees and other
landscaping. The opening of the stream corridor and the removal of the previous
access road in the easement area made it impossible for vehicles or pedestrians to use
the easement area for ingress, egress, or parking. Hume conceded that after 2001, no
surface use of the easement was possible and she abandoned any claim of easement
rights in Tract A with the exception of easement rights for underground utilities serving
Lot B. All of the improvements to the stream and Tract A were completed in late 2003
and early 2004.
-3-
No. 77769-6-114
In 2005, Haley purchased Lot B by statutory warranty deed from Hume. In
connection with the purchase, Haley obtained a title insurance policy from Pacific
Northwest Title Insurance Company, Inc., the predecessor of First American.1
In 2012, Haley discovered the original easement on Tract A. Haley asked Pugh
for permission to build a pedestrian bridge over the steam and widen his driveway into
the easement area for additional parking. Pugh refused this request and informed
Haley that Hume had previously abandoned the easement. Haley filed suit against
Pugh, and Pugh counterclaimed against Haley to quiet title to the easement. During
litigation, Pugh submitted a declaration from Hume that admitted she had consented to
the improvements to the easement area and was aware that the improvements were an
abandonment of her easement rights.
The trial court granted summary judgment in favor of Pugh declaring that Hume
abandoned the easement except the rights to utility, sewage, and drainage to the extent
those utilities served Haley’s property. This court affirmed the trial court in an
unpublished decision. Haley v. Pugh, No. 70649-7-I (Wash. Ct. App. Oct. 27, 2014)
(unpublished), http://www.courts.wa.gov/opinions/pdf/706497.pdf.
On November 26, 2012, prior to the trial court’s final decision on summary
judgment, Haley tendered his defense to First American. First American rejected
Haley’s tender of defense.
On December 21, 2016, Haley filed suit against Hume and First American.
Haley asserted that by abandoning the easement Hume violated the statutory
warranties included in their deed. Haley also asserted that First American acted in bad
1 Which was later acquired by First American Title Insurance company.
-4-
No. 77769-6-1/5
faith when it denied Haley’s tender of defense, and that First American’s conduct
amounted to a breach of the Consumer Protection Act, ch. 19.86 RCW. First American
filed a counterclaim against Haley seeking a declaratory judgment that it owed no duty
to defend Haley.
In October 2017, each party moved for summary judgment. Hume also
requested her attorney fees and costs and asked the court to sanction Haley under CR
11 and RCW4.84.185. On November 3, 2017, the trial court denied Haley’s motion,
granted Hume’s motion, and denied Hume’s request for attorney fees and costs. On
November 6, 2017, the trial court granted First American’s motion and dismissed the
case. Haley appeals both orders.
Haley first contends that the trial court erred in dismissing Haley’s claims against
Hume for her breach of present and future warranties. We disagree.
We review summary judgment decisions de novo and engage in the same inquiry
as the trial court. Mastro v. Kumakichi Corn, 90 Wash. App. 157, 162, 951 P.2d 817
(1998). “Summary judgment is appropriate only where there are no genuine issues of
material fact and the moving party is entitled to judgment as a matter of law.” Mastro,
90 Wash. App. at 157 (citing CR 56(c)). “All facts and reasonable inferences therefrom
must be viewed in the light most favorable to the nonmoving party.” Post v. City of
Tacoma, 167 Wash. 2d 300, 308, 217 P.3d 1179 (2009).
A.
A statutory warranty deed provides five guarantees against title defects:
(1) that the grantor was seised of an estate in fee simple (warranty of
seisin); (2) that he had a good right to convey that estate (warranty of right
to convey); (3) that title was free of encumbrances (warranty against
-5-
No. 77769-6-116
encumbrances); (4) that the grantee, his heirs and assigns, will have quiet
possession (warranty of quiet possession); and (5) that the grantor will
defend the grantee’s title (warranty to defend).
Mastro, 90 Wash. App. at 162 (quoting 17 WILLIAM B. STOEBUCK, WASHINGTON PRACTICE:
REAL ESTATE: PROPERTY LAW § 7.2, at 447 (1995)). The warranties of seisin, the right to
convey, and against encumbrances, are present covenants. Present covenants are
breached, if at all, at the time of conveyance. Double L. Properties, Inc. v. Crandall, 51
Wash. App. 149, 152, 751 P.2d 1208 (1988). The warranties of quiet enjoyment and to
defend are future covenants. “These covenants are generally breached after
conveyance, when a third party asserts a claim to the property.” Rowe v. Klein, 2 Wn.
App. 2d 326, 329, 409 P.3d 1152 (2018).2 The statute of limitations for an action based
on contract or written agreement, including breach of a statutory warranty deed, is six
years. RCW4.16.040(1); Ericksonv. Chase, 156 Wash. App. 151, 231 P.3d 1261 (2010);
Whatcom Timber Co. v. Wright, 102 Wash. 566, 568, 173 P. 724 (1918).
B.
We first address Haley’s claim that Hume breached the present covenants.
Haley does not dispute that more than six years have elapsed since the 2005 warranty
deed conveyance. Haley instead argues that the discovery rule should apply. The
discovery rule is ‘a rule for determining when a cause of action accrues and the statute
of limitations commences to run.” 1000 Virginia Ltd. Partnership v. Vertecs Corp., 158
Wash. 2d 566, 587, 146 P.3d 423 (2006). Haley argues that because Hume concealed the
2 Initially, Hume asserts that statutory warranties do not apply to easements because easements
are only usufructuary rights: “[a]lthough the dominate estate has a right to use the servient estate, the
land remains the property of the servient estate.” Kave v. Mcintosh Ridge Primary Road Ass’n, 198 Wn.
App. 812, 825, 394 P.3d 446 (2017). It is unnecessary for us to decide this issue because even if we
assume that statutory warranties can apply to easements, all of Haley’s statutory warranty claims were
properly dismissed on different grounds.
-6-
No. 77769-6-117
fact that she abandoned the easement until 2012, it was impossible for him to know that
she violated the present statutory warranties and therefore the statute of limitations
should not begin to run against him until 2012.
We recently rejected a similar argument in Rowe v. Klein, 2 Wash. App. 2d 326,
409 P.3d 1152 (201 8). Jeffrey and Rebecca Rowe (Rowe) bought property from Trent
and Melissa Adams (Adams) via a statutory warranty deed in 1998. The Adams/Rowe
property was adjacent to and south of property owned by Joel Klein. Klein contended
that he had maintained the northern 10 feet of the Adams/Rowe property from 1974 to
1984 and thus had adversely possessed the property prior to Rowe’s purchase from
Adams. In 2014, the Rowe sued Klein for ejectment and Klein counterclaimed for
adverse possession. The trial court granted Klein’s motion for summary judgment and
quieted title to the 10 foot strip of property in Klein. Rowe, 2 Wash. App. 2d at 330-31.
Six years and three months after Rowe bought the property he sued Adams for
breach of warranties and covenants. j~ While the six-year statute of limitations had
run, Rowe argued that because Klein’s possession at the time of conveyance was not
evident, his possession was not disturbed until Klein brought his claim for adverse
possession in 2014. kI. at 334-35. We disagreed, concluding instead that regardless of
whether Klein’s occupation was apparent in 2014, because Klein had adversely
possessed the property from 1974 to 1984, Adams did not have complete legal title to
the property in 2014. kI. Consequently, the warranty of seisin was breached at
conveyance and the six-year statute of limitation began to run at conveyance. ki.
Similarly here, Haley is arguing that the statute of limitations should not have run
on his present statutory warranty claims because Hume’s abandonment of the
-7-
No. 77769-6-1/8
easement was not evident at the time of conveyance. But, just as in Rowe, because
Hume had abandoned her right to the easement, she did not have legal title to the
easement when she conveyed Lot B to Haley. As with Rowe, the present warranties
were breached at conveyance. ~ 2 Wash. App. 2d at 335. Since Haley did not file suit
against Hume until 11 years later, his claims are time barred. RCW4.16.040(1).
C.
We next address Haley’s claim for breach of the future warranty of quiet
possession. The warranty of quiet possession “warrants to the grantee, his or her heirs
and assigns, the quiet and peaceable possession’ of the property conveyed.” Rowe, 2
Wash. App. 2d at 335. The warranty guarantees the grantee “shall not, by force of
paramount title, be evicted from the land or deprived of its possession. Foley v. Smith,
14 Wash. App. 285, 290-91, 539 P.2d 874 (1975). The warranty of quiet possession is
“breached when the buyer of land is actually or constructively evicted by one who holds
a paramount title that existed at the time of the conveyance.” Rowe, 2 Wash. App. 2d at
336. “Where a third party with superior title is in possession at the time of conveyance
so that the buyer cannot take possession, the buyer is constructively evicted at
conveyance.” Rowe, 2 Wash. App. 2d at 336.
The dispositive question is whether, when Hume conveyed Lot B to Haley, Pugh
already possessed the disputed easement area such that Haley was unable to take
possession. If so, then Haley was constructively evicted at conveyance and the statute
of limitations began to run at conveyance. Rowe, 2 Wash. App. 2d at 338.
In Rowe, the court determined that Klein had adversely possessed the disputed
strip of land by his use from 1974 to 1984, thereby triggering claims for present
-8-
No. 77769-6-119
warranties at conveyance. We considered it a different question, however, when
addressing the future warranty of quiet possession. We instead focused on whether
Klein’s use of the property at the time of possession would put a reasonable person on
notice of Klein’s claim. Rowe, 2 Wash. App. 2d at 339. We concluded that Rowe was on
notice as to the area where Klein’s greenhouse intruded into the disputed strip. We
further concluded, however, that Rowe was not on notice of Klein’s constructed
possession of the remainder of the strip. Thus, the statute of limitations for Rowe’s
claim for breach of the warranty of quiet possession did not start to run until Klein sued
for adverse possession.
In McDonald v. Ward, 99 Wash. 354, 169 P. 851 (1901), the court considered a
buyer’s claim against the seller for breach of the warranty of possession. There, the
buyer purchased property that included a railroad. The buyer farmed all of the land
except for a 20-foot strip adjacent to the railroad line. ~ at 354-55. After the railroad
claimed superior title a strip of land 200-feet wide, the buyer brought an action against
the seller. The McDonald court held that the buyer was on constructive notice of the
railroad’s claim of a 40-foot wide strip between the railroad track and a line of telegraph
poles running parallel to the track because the telegraph line was incidental to the track
and thus readily apparent to a reasonable person that the railroad occupied the area
between the track and telegraph. McDonald, 99 Wash. at 358-59. Consequently, the
statute of limitations for the 40-foot wide strip began to run at the conveyance.
Because there was no similar indication of the railroad’s superior claim to the remaining
area, however, the McDonald court concluded that the buyer’s claim against the seller
-9-
No. 77769-6-1/10
for the remaining strip of land commenced to run at the time the railroad brought its
action to oust the buyer. Id.
Here, while Haley claims to have used the easement area by maintaining a small
hedge and landscaping between the stream and his driveway, there was no evidence
that at the time of Haley’s 2005 purchase from Hume, the easement area was usable
for ingress, egress, or parking. To the contrary, north of the small hedge the land drops
steeply to the newly daylighted stream. As with the greenhouse area in Rowe, and the
strip of land between the railroad track and telegraph lines in McDonald, a reasonable
person would have been on notice that the easement area was not usable for its
intended purpose.3 Because Pugh already possessed the disputed easement area
such that Haley was unable to take possession, Haley was constructively evicted at
conveyance and the statute of limitations began to run at conveyance.
D.
Haley also alleges that Hume violated the warranty to defend. “The warranty to
defend is a future covenant that no lawful, outstanding claims against the property
exist.” Mastro, 90 Wash. App. at 164. Before the buyer can recover under this warranty,
the buyer “must make an effective ‘tender of defense’ to the [seller].” Mastro, 90 Wn.
App. at 164 (quoting Double L Props., Inc., 51 Wash. App. at 156.)
An effective tender has four elements. It must
notify the [seller] that: (1) there is a pending action; (2) if liability is found,
the [buyer] will look to the [seller] for indemnity; (3) the notice constitutes
formal tender of the right to defend the action; and (4) if the [seller] refuses
~ Hume also points out that development adjacent to the daylighted stream would be prohibited
by Mercer Island. It appears that Mercer Island requires a standard buffer of 25 feet for streams restored
or created from the opening of a previously piped watercourse. Mercer Island Municipal Code 19.07.070.
-10-
No. 77769-6-I/Il
to defend, it will be bound to factual determinations in the original action in
subsequent litigation between the [buyer] and [seller].
Erickson, 156 Wash. App. at 158 (quoting Mastro, 90 Wash. App. at 164-65). The seller
must then “refuse this tender to breach the warranty to defend.” Erickson, 156 Wn.
App. at 158.
While Haley v. Pugh was pending before the trial court, Haley sent Hume two e
mails. Haley concedes that these e-mails did not comply with the detailed formalities of
tendering a defense but asserts that detailed formalities in the tender would have been
futile and therefore were unnecessary. But Haley offers no support for the proposition
that when a party believes formally tendering a defense would be futile, that party is
relieved from the burden of doing so. To the contrary, this court has been unequivocal
when stating the requirement to properly tender defense. See Mastro, 90 Wash. App. at
165 (“Mastro’s letter clearly and unambiguously me[t] the criteria.”). See also
Edmonson v. Popchoi, 172 Wash. 2d 272, 279, 256 P.3d 1223 (2011) (“we hold that the
warranty to defend means that, upon proper tender, a grantor is obligated to defend in
good faith and is liable for a breach of that duty.”) (Emphasis added).
For the duty to defend to be breached, the buyer must first tender a formal
defense that meets the Mastro requirements. 90 Wash. App. at 165. Haley’s e-mails to
Hume did not meet these formal requirements and therefore the trial court did not err in
granting Hume’s motion for summary judgment.4
~ For the first time in his reply brief, Haley also argues that Hume violated her duty of good faith
and fair dealing. Haley has waived this argument. ~ Brown v. Vail, 169 Wash. 2d 318, 336 nil, 237
P.3d 263 (2010) (a party that offers no argument in its opening brief on a claimed assignment of error
waives the assignment.”); Cowiche Canyon Conservancy v. Bosley, 118 Wash. 2d 801, 809, 828 P.2d 549
(1992) (an issue raised and argued for the first time in a reply brief is too late to warrant consideration.”).
—11—
No. 77769-6-1/12
Ill.
Haley next contends that the trial court erred by dismissing Haley’s claims for
breach of duty to defend and bad faith against First American. We disagree.
A.
Standard liability insurance policies impose two distinct duties on insurance
companies: “the duty to defend the insured against lawsuits or claims and the duty to
indemnify the insured against any settlements of judgments.” United Services Auto.
Ass’n v. Speed, 179 Wash. App. 184, 194, 317 P.3d 532 (2014). “[T]he duty to defend is
different from and broader than the duty to indemnify.” Am. Best Food, Inc. v. Alea
London, Ltd., 168 Wash. 2d 398, 404, 229 P.3d 693 (2010).
“The duty to indemnify only exists if the policy actually covers the insured’s
liability. The duty to defend is triggered if the insurance policy conceivably covers
allegations in the complaint.” Am. Best Food, 168 Wash. 2d at 404 (citing Woo v.
Fireman’s Fund Ins. Co., 161 Wash. 2d 43, 53, 164 P.3d 454 (2007)). “The duty to defend
arises when a complaint against the insured, construed liberally, alleges facts which
could, if proven, impose liability upon the insured within the policy’s coverage.” Am.
Best Food, 168 Wash. 2d at 404 (internal citation omitted). The insurer “must defend until
it is clear that the claim is not covered.” Am. Best Food, 168 Wash. 2d at 405.
“The duty to defend generally is determined from the ‘eight corners’ of the
insurance contract and the underlying complaint.” Expedia Inc. v. Steadfast Ins. Co.,
180 Wash. 2d 793, 803, 329 P.3d 59 (2014). There are two exceptions to the eight
corners rule. “First, if coverage is not clear from the face of the complaint but coverage
could exist, the insurer must investigate and give the insured the benefit of the doubt.”
-12-
No. 77769-6-1/13
Expedia, 180 Wash. 2d at 803. “Second, if the allegations in the complaint conflict with
facts known to the insurer or if the allegations are ambiguous, facts outside the
complaint may be considered.” Expedia, 180 Wash. 2d at 803-04. But “extrinsic facts may
only be used to trigger the duty to defend; the insurer may not rely on such facts to deny
its defense duty.” Expedia, 180 Wash. 2d at 804. While the insurer is allowed to
“investigate the facts and dispute the insured’s interpretation of the law . . . if there is
any reasonable interpretation of the facts or the law that could result in coverage, the
insurer must defend.” Am. Best Food, 168 Wash. 2d at 405.
B.
First American properly rejected Haley’s tender of defense because general
exception 3 in its title policy applied to the Pugh v. Haley dispute. We “interpret
insurance policy provisions as a matter of law[,]” and construe exclusionary clauses
most strictly against the insurer. Am. Best Food, 168 Wash. 2d at 404, 406.
General exception 3 states that “[t]his policy does not insure against loss or
damage by reason of. . . other matters which would be disclosed by an accurate survey
or inspection of the premises.” The American Land Title Association and National
Society of Professional Surveyors (ALTAINSPS) publishes the minimum standard detail
requirements for land title surveys.5 The 2005 edition provided that “[t]he survey shall
be performed on the ground and the plat or map of a [survey] shall contain[:]”
(f) the character of any and all evidence of possession shall be stated and
the location of such evidence carefully given in relation to both the
measured boundary lines and those established by the record . .
(h) All easements evidenced by Record Documents which have been
delivered to the surveyor shall be shown If such an easement cannot
. . .
~ See NAT’L Soc. OF PROF. SURVEYORS, ALTA/NSPS STANDARDS (2016),
https://nsps. us.com/page/ALTANSPSStandards. This information was presented to the trial court.
-13-
No. 77769-6-1114
be located, a note to this effect shall be included. Observable evidence of
easement and/or servitudes of all kinds . on adjoining properties if they
. .
appear to affect the surveyed property, shall be located and noted. If the
surveyor has knowledge of any such easement and/or servitudes, not
observable at the time the present survey is made, such lack of
observable evidence shall be noted.
G) Where there is evidence of use by other than the occupants of the
property, the surveyor must so indicate.
(I) Ponds, lakes, springs, or rivers bordering on or running through the
premises being surveyed shall be shown.
These minimum ALTAINSPS requirements confirm that if Haley had conducted a
survey in 2005, it would have disclosed that the easement area was exclusively
possessed by someone other than Hume. The survey would have disclosed the
recorded easement benefitting Haley’s property. Following the ALTAINSPS standard,
the survey would have noted the evidence of Pugh’s possession, noted that the
easement was not observable at the time the survey was made, noted that there was
evidence of use by someone other than Hume, and noted that there was a stream in the
middle of the easement area. All of these would have indicated that the condition of the
easement area in 2005 was inconsistent with the use of the easement that Haley
believed he was acquiring. As such, a survey would have disclosed the loss that Haley
now asserts.
Haley argues that First American violated the eight corners rule in rejecting his
defense under general exception 3. This is so, he contends, because First American
relied on information outside the complaint and policy. But in his counterclaim, Pugh
asserted that “[a]t the time [Haley] acquired title to his property, the easement
area . . . had been altered in such a manner as to defeat and render impossible the
intended use of the easement.” If true, then an accurate inspection would have
-14-
No. 77769-6-1/15
identified the fact that there was a recorded easement on Tract A benefitting Lot B, that
the condition of the easement area made the use of that easement impossible, and that
Pugh was in exclusive possession of the easement area. Therefore, First American did
not rely on information outside of the eight corners in rejecting Haley’s tender of defense
under general exception 3.
Haley further argues that under Nautilus, Inc. v. Transamerica Title Ins. Co. of
Wash., 13 Wash. App. 345, 534 P.2d 1388 (1975), general exception 3 does not apply. In
Nautilus, however, the dispute was over who owned the land between the ordinary high
water mark and the meander line of a river. The court determined that because this
was a legal question about the interpretation of a deed, a survey would not answer it.
Nautilus, 13 Wash. App. at 349. Here, however, the dispute was not over who owned the
easement area but what the easement area’s condition was when Haley purchased Lot
B. A survey would be able to determine that the condition of the easement area
indicated that Pugh—or at least someone other than Hume—was in exclusive
possession of the area.
If “it is clear from the face of the complaint that the policy does not provide
coverage” then there is no duty to defend. Speed, 179 Wash. App. at 196 (citing Woo,
161 Wash. 2d at 404). Because general exception 3 to Haley’s title insurance policy
applied and indicated that First American did not have a duty to defend Haley, the trial
court did not err in granting First American’s motion for summary judgment. Therefore,
we find it unnecessary to determine whether any of the other policy exceptions or
exclusions also apply, or whether Haley’s tendered his defense to First American in a
timely manner.
-15-
No. 77769-6-1116
lv.
Hume cross appeals and argues that the trial court erred in denying the requests
for an award of attorney fees under either the residential purchase and sale agreement,
or alternatively, under CR 11 and RCW 4.84.185. We disagree.
A.
The residential real estate purchase and sale agreement between Haley and
Hume provides that “{i]f Buyer or Seller institutes suit against the other concerning this
Agreement, the prevailing party is entitled to reasonable attorneys’ fees and expenses.”
Hume asked the trial court to award her reasonable attorney fees and costs under this
provision of the purchase and sale agreement. The trial court correctly denied Hume’s
request for attorney fees and costs because the purchase and sale agreement merged
with the statutory warranty deed upon closing.
In Brown v. Johnson, the buyer sued the seller of a home for misrepresentation.
109 Wash. App. 56, 34 P.3d 1233 (2001). This court reversed the trial court’s “refusal to
award attorney fees based on the parties’ purchase and sale agreement” over the
seller’s argument that the purchase and sale agreement merged with the deed upon
transfer. Brown, 109 Wash. App. at 57, 59. Under the merger doctrine, upon closing “the
terms of a real estate purchase and sale agreement merge into a deed” but the doctrine
“has its exceptions.” Brown, 109 Wash. App. at 59-60. “The rule . . . does not apply
where terms of a purchase and sale agreement are not contained in or performed by
the execution and delivery of the deed, are not inconsistent with the deed, and are
independent of the obligation to convey.” Brown, 109 Wash. App. at 60. In Brown, the
court determined that the merger doctrine did not apply because the action did “not
-16-
No. 77769-6-1/17
relate to title or any other terms contained in the deed and therefore [fell] within the
doctrine’s exceptions.” 109 Wash. App. at 60.
To the contrary, here, Haley tied his claims directly to the deed and not the
purchase and sale agreement. Therefore, upon closing the purchase and sale
agreement merged with the deed. As that deed does not include a provision relating to
attorney fees, the trial court did not err in denying Hume’s motion. 6
Hume disagrees with this conclusion and argues that while Haley’s other claims
were based on the deed, his allegation that Hume violated her duty of good faith and
fair dealing must have been based on the purchase and sale agreement. Hume offers
no support for this claim other than the fact that Haley’s attorney mentioned the
purchase and sale agreement once during oral argument, and that Haley asserted
separate causes of action for the breach of good faith and fair dealing and the breach of
the statutory warranties. But “[t]here is in every contract an implied duty of good faith
and fair dealing,” Badciett v. Security State Bank, 116 Wash. 2d 563, 569, 807 P.2d 356
(1991),~ and Hume has not shown how Haley’s claims were based on the implied duty
of good faith and fair dealing in the purchase and sale agreement and not the implied
duty of good faith and fair dealing in the deed.
B.
Hume also argues that the trial court erred in denying her motion for attorney
fees under CR 11 and RCW 4.84.185. CR 11 requires attorneys to sign “[e]very
6 Hume also cites to an unpublished Division Three opinion Kioster v. Roberts, No. 30546-5-Ill
(Wash. Ct. App. Feb. 6, 2014) (unpublished), http:IIwww.courts.wa.gov/o``inionsIpdfI305465.unrj.~df. But
the court in Kioster simply analogized to Brown and determined that [t]he Kloster’s misrepresentation
and concealment claims” arose out of the purchase and sale agreement. Kloster, slip op. at 44.
Therefore, Kloster does not support Hume’s argument for the same reason Brown does not support
Hume’s argument.
~ Including in a statutory warranty deed.
.~ Edmonson, 172 Wash. 2d at 280.
-17-
No. 77769-6-1/18
pleading, motion, and legal memorandum” as a certification that the filing “is well
grounded in fact; . . . is warranted by existing law or a good faith argument for the
extension . . . of existing law; . . . [and] is not interposed for any improper purpose.”
RCW4.84.185 allows a court to award the prevailing party its attorney fees and costs
upon a finding that “the action. . . was frivolous and advanced without reasonable
cause.”
“The purpose behind CR 11 is to deter baseless filings and to curb abuses of the
judicial system.” Bryantv. Joseph Tree Inc., 119 Wash. 2d 210, 219, 829 P.2d 1099
(1992). Similarly, the purpose of RCW4.84.185 is to “discourage frivolous lawsuits and
to compensate the targets of such lawsuits for fees and expenses incurred in fighting
meritless cases.” Biggs v. Vail, 119 Wash. 2d 129, 137, 830 P.2d 350 (1992). But the rule
“is not intended to chill an attorney’s enthusiasm or creativity in pursuing factual or legal
theories.” Bryant, 119 Wash. 2d at 219 (specific to CR 11). “Complaints which are
grounded in fact and warranted by existing law or a good faith argument for the
extension, modification, or reversal of existing law are not [frivolous or] baseless
claims.” Bryant, 119 Wash. 2d at 219-20.
Haley’s suit was not frivolous or baseless but instead was a good faith argument
for the extension of existing law. The discovery rule is a doctrine of existing law that
allows a statute of limitations to be tolled upon certain occurrences. See 1000 Virginia,
158 Wash. 2d at 566. Haley made a good faith argument to the trial court that the
discovery rule should be extended to statutory warranty deeds. That the trial court
ultimately rejected that argument does not mean it was frivolous or baseless. As such,
the trial court did not err in denying Hume’s motion for attorney fees and costs.
-18-
No. 77769-6-1/19
V.
Finally, Hume requests her attorney fees on appeal pursuant to RAP 18.1, CR
11, and RCW 4.84.185. RAP 18.1 allows this court to award fees “[i]f applicable law
grants” such a right. However, since neither CR 11 nor RCW 4.84.185 grant Hume the
right to recover her fees, we deny her request.
Haley also requests his fees on appeal pursuant to RAP 18.1, CR 11, and RAP
18.9 for having to respond to Hume’s cross appeal. But Hume also made a good faith
argument in advancing her concerns about the validity of Haley’s suit. Requesting her
attorney fees was neither baseless nor frivolous.
We affirm.
r ~v~rr~1 ,II``i
WE CONCUR:
V
—44~J-
1’
-19-