Glogowski Law Firm, Pllc. v. City First Mortgage Services, Llc.

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IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
GLOGOWSKI LAW FIRM, PLLC, )
) No. 74266-3-1
Respondent, )
) DIVISION ONE
v. )
) UNPUBLISHED OPINION
CITY FIRST MORTGAGE SERVICES, )
LLC, )
) FILED: February 6, 2017
Appellant. )
Appelwick, J. — Glogowski sued City First for its legal fees, and City First
counterclaimed for legal malpractice. The trial court dismissed the legal
malpractice claim on summary judgment. We reverse and remand for trial.
FACTS
Glogowski Law Firm PLLC sued City First Mortgage Services LLC for
breach of contract after City First failed to pay Glogowski for legal services. City
First hired Glogowski to defend it in a lawsuit brought by Donald and Beth Collings.
Katrina Glogowski was the attorney primarily responsible for the case.1
The Collingses contacted City First after receiving a flier advertising a
program for people with credit problems. Collings v. City First Mortg. Servs., LLC,
177 Wash. App. 908, 914, 317 P.3d 1047 (2013). The Collingses were concerned
1 For clarity, we refer to Glogowski Law Firm PLLC as Glogowski, and
Katrina Glogowski, the attorney who handled the Collings case, as Ms. Glogowski.
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about falling behind in their payments on their home. jd. Beth Collings first spoke
with Gavin Spencer, an employee at a City First Branch in Utah, who assisted her
in applying for a loan over the phone. Id. Spencer informed the Collingses that
the loan had not been approved, but suggested that his manager might be able to
help them. Id.
Spencer introduced the Collingses to Paul Loveless and Andrew Mullen,
City First branch managers, jd. Loveless suggested a plan: he would buy the
Collingses' home for its appraised value, take out a mortgage on the home, and
lease it back to them. jd at 915. The Collingses agreed, on the condition that the
lease would prohibit Loveless from refinancing the home and encumbering it with
a home equity line of credit. Id In accordance with the agreement, Loveless took
title to the home and executed a mortgage with City First. Id
Two years later, the Collingses discovered that Loveless had refinanced the
loan with City First and taken out a home equity line of credit, Id Loveless had
failed to make payments, and a foreclosure action had commenced, jd. at 915-
16. Once the Collingses learned of the foreclosure action, they stopped making
lease payments to Loveless. Id. at 915.
The Collingses sued City First, Loveless, Mullen, and Spencer in March
2009. jd They alleged equity skimming, a civil conspiracy, usury, and violations
of the Residential Landlord-Tenant Act of 1973,2 the Credit Services Organizations
2 Chapter 59.18 RCW.
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Act (CSOA),3 and the Consumer Protection Act.4 They sought damages and
injunctive relief.
Loveless defaulted. Collings, 177 Wash. App. at 916. It was undisputed that
his scheme constituted illegal equity skimming, jd After a trial, the jury found that
Loveless, Mullen, and City First were liable to the Collingses. jd It determined
that Loveless and City First were liable for $40,311 in compensatory damages and
imposed $80,622 in punitive damages against the two under the CSOA. jd It also
imposed $8,000 in punitive damages against Mullen.5 \jL The court entered
judgment against City First in the amount of $120,933. CP 1476-77.
City First appealed. Id at 917. It argued that there was insufficient evidence
of its liability on all of the Collingses' claims, jd at 923. This court concluded that
because City First did not propose a special verdict form to clarify the basis for the
jury's verdict, the verdict would stand so long as at least one of the Collingses'
claims was supported by the evidence. ]d at 925. It held that there was sufficient
evidence to support City First's vicarious liability for Loveless, who defaulted on all
of the claims. Id.
Glogowski filed the instant suit due to City First's failure to pay for the legal
services rendered in Collings. City First asserted a counterclaim for legal
3 Chapter 19.134 RCW.
4 Chapter 19.86 RCW.
5 The jury verdict form required the jury to answer a number of questions
about liability and damages. The jury found that Loveless and Mullen were liable
to the Collingses on their claims. It found that City First was liable for the acts of
Loveless, Mullen, and Spencer. It also determined that City First was
"independently liable to the Collingses for their claims." The jury also specifically
found that Loveless, Mullen, and City First were liable to the Collingses for violating
the CSOA.
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malpractice. Glogowski moved for summary judgment on the counterclaim. It
argued that City First could not prove that Ms. Glogowski's conduct proximately
caused the adverse verdict in the Collings case.
The court originally denied Glogowski's motion for summary judgment.
Glogowski filed a motion for reconsideration, providing additional authority on the
propriety of deciding proximate cause on summary judgment. The trial court
granted this motion. It denied City First's subsequent motion for reconsideration.
City First appeals.
DISCUSSION
City First asserts that the trial court erred in dismissing its legal malpractice
claim. It argues that it created genuine issues of material fact on the issue of
proximate cause that preclude summary judgment. City First contends that an
issue remains as to whether, had Ms. Glogowski raised exemption from the CSOA
or the Consumer Loan Act (CLA) as a defense, the jury would have imposed
punitive damages.
This court reviews a summary judgment order de novo. Loeffelholz v. Univ.
of Wash., 175 Wash. 2d 264, 271, 285 P.3d 854 (2012). The court reviews the
evidence in the light most favorable to the nonmoving party and draws all
reasonable inferences in that party's favor. Klinke v. Famous Recipe Fried
Chicken, Inc., 94 Wash. 2d 255, 256, 616 P.2d 644 (1980). Summary judgment is
appropriate where there is no genuine issue of material fact and the moving party
is entitled to judgment as a matter of law. Jones v. Allstate Ins. Co., 146 Wash. 2d
291, 300-01, 45 P.3d 1068 (2002). A material fact is one upon which the outcome
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of the litigation depends, either in whole or in part. VersusLaw, Inc. v. Stoel Rives,
LLP, 127 Wash. App. 309, 319, 111 P.3d 866 (2005). The court should grant
summary judgment when reasonable minds could reach only one conclusion, jd
There are four elements of a legal malpractice claim: (1) an attorney-client
relationship existed, (2) the lawyer had a duty, (3) the lawyer failed to perform the
duty, and (4) the lawyer's negligence was a proximate cause of the damage to the
client. Halvorsen v. Ferguson, 46 Wash. App. 708, 711-12, 735 P.2d 675 (1986).
Attorneys have a duty to exercise the degree of care, skill, diligence, and
knowledge commonly possessed and exercised by a reasonable, careful, and
prudent lawyer practicing in this jurisdiction, jd. at 712.
Proximate cause requires there to be a nexus between the attorney's
breach of duty and the resulting injury. Estep v. Hamilton, 148 Wash. App. 246, 256,
201 P.3d 331 (2008). To establish proximate cause, the client must prove that,
butfor the attorney's negligence, he or she would have prevailed or at least would
have achieved a better result. Halvorsen, 46 Wash. App. at 719. Generally,
proximate cause is a question for the jury. Smith v. Preston Gates Ellis, LLP, 135
Wash. App. 859, 864, 147 P.3d 600 (2006). But, the court can decide proximate
cause as a matter of law if reasonable minds could not differ. Id
City First argues that the trial court erred in dismissing its legal malpractice
claim based on proximate cause. City First argues that Ms. Glogowski failed to
raise defenses under the CSOA and CLA, which would have exempted City First
from liability. Therefore, the question before us is whether City First could have
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received a more favorable outcome if Ms. Glogowski had raised one of these
defenses.
Among other things, the CSOA prohibits those who attempt to assist
borrowers in preventing or delaying foreclosure from making untrue or misleading
representations. RCW 19.134.020, .010(2). It defines a "credit services
organization" as
[Ajny person who, with respect to the extension of credit by others,
sells, provides, performs, or represents that he or she can or will sell,
provide, or perform, in return for the payment of money or other
valuable consideration any of the following services:
(i) Improving, saving, or preserving a buyer's credit record,
history, or rating;
(ii) Obtaining an extension of credit for a buyer;
(iii) Stopping, preventing, or delaying the foreclosure of a deed
of trust, mortgage, or other security agreement; or
(iv) Providing advice or assistance to a buyer with regard to
[any of the above].
RCW 19.134.010(2)(a). The CSOA also specifies what a credit services
organization does not include. RCW 19.134.010(2)(b). At issue here is the
exemption of,
Any person authorized to make loans or extensions of credit under
the laws of this state or the United States who is subject to regulation
and supervision by this state or the United States or a lender
approved by the United States secretary of housing and urban
development for participation in any mortgage insurance program
under the national housing act.
RCW19.134.010(2)(b)(i).
City First asserts that it is exempt from the CSOA due to this provision, and
therefore it should not have been subject to the Collingses' CSOA claim. City First
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contends this is so, because City First has held and continuously maintained a
license from the Federal Housing Authority (FHA) since at least 1997. And, City
First is directly supervised by a federal regulator: the United States Department of
Housing and Urban Development (HUD). City First asserts that as its licensees,
Loveless and Mullen are also supervised by HUD, and therefore exempt as well.
At the underlying trial, in City First's motion for judgment as a matter of law,
Ms. Glogowski argued that City First was exempt from the CSOA. But, she limited
her argument to the exemption for " 'any person authorized to make loans or
extensions of credit under the laws of this state.' " (Quoting RCW
19.134.010(2)(b)(i)). She quoted this portion of RCW 19.134.010(2)(b)(i), arguing
that because City First is licensed by the Department of Financial Institutions (DFI)
as a consumer loan company, it is exempt from the CSOA. On appeal, the Collings
court rejected that argument. See 177 Wash. App. at 929-30. It determined that DFI
regulations indicate that every branch must be licensed in the state to be
authorized to make loans or extensions of credit under the laws of Washington.
See id at 930. The City First branch at issue was not licensed in the state. \±
No mention was made in the trial motion to the language that immediately
follows in RCW 19.134.010(2)(b)(i): "or the United States who is subject to
regulation and supervision by this state or the United States or a lender approved
by the United States secretary of housing and urban development for participation
in any mortgage insurance program under the national housing act." This
language creates an exemption for entities that are authorized to make loans and
extensions of credit under federal law and are regulated by a federal entity. Yet,
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Ms. Glogowski did not argue that City First was entitled to this exemption. Nor did
she specifically object to jury instruction 19, which summarized the CSOA
exemption as, "A 'credit services organization' does not include a person or entity
authorized to make loans under the laws of the state of Washington."6
Consequently, this instruction did not mention that an entity may be exempt if it is
authorized to make loans under federal law. And, the Court of Appeals had no
reason to consider a federal law exemption in its opinion.
In the malpractice action, City First produced a declaration of Brian Hunt as
support for an exemption based on regulation at the federal level. Hunt is general
counsel for City First. He stated that the information in his declaration was based
on his own personal knowledge. This declaration states that City First has been
continuously licensed by the FHA since 1997. And, City First is directly supervised
by HUD, so it is an approved HUD and FHA lender. It also states that City First is
a licensed mortgage broker. And, it provides that Loveless and Mullen were HUD
and FHA approved lenders as licensees of City First.7 While not conclusive, these
statements create a genuine issue of material fact on City First's status under the
CSOA.
6Ms. Glogowski generally objected to a list of the Collingses' proposed jury
instructions, including instruction 19. But, she did not provide any grounds for the
objection. CR 51(f) requires counsel to "state distinctly the matter to which counsel
objects and the grounds of counsel's objection" to a particular jury instruction.
Where counsel does not clarifythe reasons for the objection, a reviewing court will
not consider the objection. Walker v. State, 121 Wash. 2d 214, 217, 848 P.2d 721
(1993). Indeed, this court determined that City First did not take exception to
instruction 19. Collings, 177 Wash. App. at 930.
7 Unlike the other statements in Hunt's declaration, this comment is a legal
conclusion. Thus, we do not consider this portion of the declaration in our analysis.
8
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Glogowski argues that even if Ms. Glogowski had raised the exemption
defense, the outcome would not have changed, because City First was found
vicariously liable for the acts of Loveless and Mullen. It contends that because
individuals are not federally regulated, Loveless and Mullen could not have
asserted the exemption defense themselves. Consequently, City First would have
still been found vicariously liable for Loveless's and Mullen's CSOA violations.
But, a corporation necessarily acts through its officers, directors,
employees, and other agents. Diaz v. Wash. State Migrant Council, 165 Wash. App.
59, 76, 265 P.3d 956 (2011). Where a corporation's agents act within the scope
of their authority, their actions are the actions of the corporation. Mauch v. Kizzling,
56 Wash. App. 312, 316, 783 P.2d 601 (1989). The only potential agents of City First
who were found liable under the CSOA were Loveless and Mullen. Therefore, had
Ms. Glogowski raised this defense, she would have had to argue that Loveless
and Mullen were acting within the scope of their authority and therefore their
actions were actually those of City First itself. Under this legal theory, City First,
Loveless, and Mullen could have been determined to be exempt from the CSOA.
Or, if Loveless and Mullen were found not to be agents of City First acting in the
scope of their authority, they might still have been found liable under the CSOA.
But, the determination of vicarious liability made in the Collings case would not
control, because the question for the jury would have changed if City First was
exempt. The outcome would not necessarily have been the same.
Viewing Hunt's declaration in the light most favorable to City First, we
conclude that a genuine issue of material fact exists as to whether City First is
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exempt from the CSOA. If Ms. Glogowski had raised the issue of exemption as a
federally licensed and regulated lender, the outcome of the Collings case may
have been different. The jury awarded $80,622 in punitive damages under the
CSOA. Punitive damages were not available under any other statute or theory at
issue. Had City First been exempt from the CSOA, the jury would not have been
able to award these punitive damages.8 Ms. Glogowski's failure to assert the
federal exemption from the CSOA may have been the proximate cause of at least
some damages incurred by City First. Therefore, the trial court erred in granting
summary judgment in favor of Glogowski.9
We reverse and remand for proceedings consistent with this opinion.
WE CONCUR:
/ (finr\%
8 For purposes of this appeal, we need not and do not address whether the
CSOA exemption would preclude any liability for City First.
9 Given the conclusion that City First's argument relating to the CSOA
should have barred summary judgment, we need not address City First's argument
relating to the CLA.
10