Opinion
No. 60533-0-I.
January 20, 2009.
Appeal from a judgment of the Superior Court for King County, No. 03-2-28290-1, Gregory P. Canova, J., entered August 7, 2007.
Reversed and remanded by unpublished per curiam opinion.
UNPUBLISHED OPINION
In the first appeal in this case, we reversed the trial court's decision to dismiss Magdi Fahim's quiet title action and vacated the summary judgment order of dismissal and the judgments entered in favor of two law firms, Peery, Hiscock, Pierson and Ryder, Inc., P.C. and the Law Offices of Gail Stagman. In the vacated summary judgment order and judgments, the court had ordered foreclosure of the Deeds of Trust held by the law firms on Fahim's house and sale of the house to pay for amounts owed under promissory notes executed by Lona Flemmer for legal services with interest, attorney fees, and costs. We also reversed the trial court's decision to impose CR 11 sanctions against Fahim and his attorney for filing frivolous tort claims. On remand, the law firms argued that in addition to the CR 11 sanctions previously awarded, the law firms were entitled to the attorney fees awarded in the vacated summary judgment order and judgments. The trial court agreed and entered an order awarding the law firms attorney fees in the exact same amount previously awarded together with prejudgment interest. We reverse and remand.
Fahim v. Flemmer, No. 55489-1-I, July 17, 2006.
The firm is now known as Kingman, Peabody, Pierson Fitzharris.
The facts are fully set forth in our first opinion and are repeated only as necessary. Magdi Fahim and Lona Flemmer lived together from 1985 until 1993. In 1992, Fahim and Flemmer had a child and purchased a house together. After separating in 1994, Flemmer retained the law firm of Peery, Hiscock, Pierson and Ryder (Peery Hiscock) and attorney Gail Stagman to represent her in disputes over the division of property and debts, custody, the parenting plan, and child support.
By May 1994, Flemmer owed Peery Hiscock approximately $11,500 and she owed Stagman approximately $3500. Unable to pay, Flemmer signed promissory notes to the two law firms for the amounts owed. In the promissory notes, Flemmer agreed to pay attorney fees and interest in the event of default. The promissory notes were secured by Deeds of Trust on certain property, including a Deed of Trust on the house she and Fahim owned. Peery Hiscock filed the Deed of Trust on the house on May 4, 1994 and Stagman filed her Deed of Trust on May 25, 1994.
In 1994, the trial court ruled on the disputes between Flemmer and Fahim. The court designated Fahim as the primary residential parent and awarded him the house, but ordered Fahim to pay Flemmer $80,000 for her interest in the house. Two years later, Flemmer quitclaimed her interest in the house to Fahim.
Flemmer did not make payments to the law firms as agreed under the promissory notes. In 1997, Flemmer filed for chapter 7 bankruptcy. In the bankruptcy, Flemmer listed the amounts owed to Peery Hiscock and Stagman.
In June 2003, Fahim, acting pro se, sued Flemmer and the law firms to quiet title to the house and for damages. Fahim alleged that he only learned about the liens when he attempted to refinance in 2003. Fahim asserted claims for fraud, misrepresentation, and slander of title. The law firms each filed counterclaims to foreclose on the Deeds of Trust to recover the amounts Flemmer owed on the promissory notes together with attorney fees and costs. In addition, the law firms requested CR 11 sanctions against Fahim.
Flemmer also asserted counterclaims and requested CR 11 sanctions.
In October 2004, the law firms filed a motion for summary judgment. The law firms argued that because the Deeds of Trust survived the transfer of Flemmer's interest in the house to Fahim, the law firms were entitled to foreclosure for the amounts owed under the promissory notes together with interest and attorney fees. The law firms also argued that the tort claims should be dismissed because Fahim's allegations did not establish a duty. The law firms also requested CR 11 sanctions against Fahim, in part, based on Fahim's misrepresentation that he did not learn about the liens until 2003.
On October 15, an attorney filed a notice of appearance on behalf of Fahim. Thereafter, Fahim filed his response to summary judgment, conceding that the tort claims should be dismissed and clarifying that he was only pursuing the quiet title action. Fahim also admitted that he learned about the Deeds of Trust on his house in 1998, but claimed that his misrepresentation was an innocent mistake. As to the quiet title action, Fahim argued that the six-year statute of limitations barred foreclosure based on the Deeds of Trust.
Before the summary judgment hearing, Fahim agreed to dismiss his claims against Flemmer with prejudice.
The trial court granted the law firms' motion for summary judgment. On January 13, 2005, the court entered an "Order of Summary Judgment of Dismissal with Prejudice and Affirmative Relief" (summary judgment order). The summary judgment order dismissed Fahim's quiet title action with prejudice, orders foreclosure of the Deeds of Trust, and orders the property to be sold and the proceeds used to pay the amounts owed under the promissory notes "for services provided to Lona R. Flemmer, with interest, attorney's fees, costs and increased costs and interest. . . ." The "Judgment on Order Granting Summary Judgment Motions of Defendant Law Firms, Dismissing Plaintiff's Complaint with Prejudice and Granting to Defendant Law Firms Foreclosure of Real Property Liens and Other Ordered Relief," also ordered foreclosure of the Deeds of Trust entered judgments for the amounts owed on the promissory notes with interest and "the Recovery and Foreclosure of Attorney's Fees and Costs. . . ." The judgment entered on behalf of Peery, Hiscock awards the law firm the principal amount owed on the promissory note of $11, 118.50 plus interest of approximately $8,800 and attorney fees and costs in the amount of $30,948. The judgment entered on behalf of Stagman was for $13,022.17 which includes $6,813 in attorney fees and costs.
In a separate "Judgment on Order Granting Sanctions to Defendant Law Firms Against Plaintiff and Plaintiff's Counsel," the court awarded each law firm CR 11 sanctions of $10,000 based on findings in the summary judgment order. The findings in the summary judgment order stated that Fahim violated CR 11 on three grounds: (1) that despite statements to the contrary, Fahim knew about and acknowledged Flemmer's debt and the liens since "at least 1998," (2) that Fahim made materially false statements under oath, and (3) that the tort claims were not supported by law or fact.
On appeal, we reversed the trial court's dismissal of Fahim's quiet title action and foreclosure of the Deeds of Trust and vacated the summary judgment order and the judgments entered in favor of the law firms. We held that there were material issues of fact as to the statute of limitations and whether the law firms were entitled to foreclosure of the Deeds of Trust based on Flemmer's promissory notes.
"Because Fahim's quiet title action was well-grounded in fact and law," we also reversed the orders awarding CR 11 sanctions to the law firms. But we stated that "[w]hile the trial court may still conclude CR 11 sanctions are appropriate, not all of the law firms' expenditures were incurred in response to meritless claims." Fahim v. Flemmer, No. 55489-1-I at 18. In a footnote, we also noted that the "trial court was entitled to conclude CR 11 sanctions were appropriate for filing the tort claims and to reject Fahim's explanation about misstating when he knew about the liens."
Fahim, No. 55489-1-I at 18 n. 11.
On remand, the law firms filed a "Joint Motion By Defendants Law Firms Seeking Judgment for Attorney Fees and Costs of Defense of Baseless Tort Claims and CR 11 Sanctions." The law firms asserted that in addition to the order awarding CR 11 sanctions for filing frivolous tort claims, the court also awarded the law firms attorney fees in the vacated summary judgment order for the defense of the frivolous tort claims:
The [law firms] moved for and were awarded, in part a Summary Judgment Dismissal With Prejudice, of all the tort claims and remedies Plaintiff alleged, and were granted the affirmative relief of Sanctions against Plaintiff and Plaintiff's counsel for violation of CR 11, and compensatory Attorney's Fees and Costs for the defense of the frivolous tort claims only.
In response, Fahim asserted that the law firms were mischaracterizing this court's opinion. Fahim argued that the law firms "should not be permitted to bootstrap their way into a result entirely without rational basis or integrity in the law, into an unjust windfall by relying on arguments and orders which the Court of Appeals reviewed and rejected." Fahim requested the court to deny the motion and asked for an award of reasonable attorney fees.
On July 16, 2007, the court entered an "Order on Defendants' Motion for Judgment of Attorney Fees and CR 11 Sanctions." The court found that the previously imposed CR 11 sanctions should be reduced from $10,000 to $2,500. However, based on the belief that the attorney fees that were previously awarded were "entirely based upon the tort claims," and that "[t]he remand directed the trial court to determine what portion of the previous awards of attorney fees and additional CR 11 sanctions were based upon the admittedly, sanctionable, meritless tort claims," the court awarded the law firms attorney fees in the exact same amounts previously awarded in the vacated summary judgment order and judgments — $30,947.68 to Peery Hiscock and $6,813.15 to Stagman. The court also determined that the attorney fee amounts "became liquidated judgments when . . . the earlier judgments [were entered] on April 1, 2005" and awarded the law firms prejudgment interest.
On August 7, 2007, the court signed a judgment for $2,500 in CR 11 sanctions and "the amount of $30,947.68, plus interest from April 1, 2005 to July 26, 2007, in the amount of $8,617.87, together with the costs and statutory attorneys fees" in favor of Peery Hiscock and another judgment for $2,500 in CR 11 sanctions and "the amount of $6,813.15, plus interest from April 1, 2005 to July 26, 2007, in the amount of $1,897.23 together with statutory attorney fees and costs" in favor of Stagman.
Fahim appeals the decision to award the law firms the same attorney fees that were awarded in the vacated summary judgment order and judgments. Fahim contends that only the CR 11 sanction orders were related to filing the tort claims and the court erred in awarding the law firms the attorney fees that were based on the terms of the promissory notes and were a part of the vacated summary judgment order and judgments. We agree.
Fahim does not appeal the court's CR 11 sanctions orders except to the extent they are imposed against his attorney.
In the first appeal, we reversed dismissal of Fahim's quiet title action and vacated the summary judgment order and the judgments. In the summary judgment order and judgments entered in favor of the law firms, the court clearly ordered foreclosure of Fahim's house to pay for the amounts owed by Flemmer on the promissory notes together with interest, attorney fees and costs. Based on the court's findings, only the separate CR 11 judgment amounts related to the tort claims that Fahim conceded were without merit.
While an award of attorney fees may be an appropriate sanction under CR 11, in this case the trial court did not choose that option. Instead, the court elected to have Fahim and his lawyer, Flynn, pay $10,000 to each law firm as sanctions under CR 11.
Nevertheless, the law firms argued on remand that they were entitled to the attorney fees awarded in the vacated summary judgment order and judgments on the grounds that those attorney fees were incurred "in defending tort claims." But there is no indication in the vacated summary judgment order or judgments that the attorney fees were awarded to the law firms for defending frivolous tort claims. To the contrary, the vacated summary judgment order and judgments that were drafted by the law firms and signed by the trial court, show that the attorney fees were awarded under the promissory notes, and not as a CR 11 sanction for frivolous tort claims. And as noted, the only findings in the summary judgment order that are related to the tort claims are clearly only related to the CR 11 sanctions.
We agree with Fahim that the law firms mischaracterized our decision in the first appeal. The summary judgment order and judgments that were vacated in the first appeal state that recovery of the amounts Flemmer owed the law firms with interest and attorney fees and costs shall be satisfied through foreclosure "and the proceeds shall be applied to the total amount of the judgment." Under the law of the case doctrine, our decision was binding on remand. State v. Strauss, 119 Wn.2d 401, 412-13, 832 P.2d 78 (1992). We conclude that the trial court clearly abused its discretion on remand in awarding the same attorney fees and costs that were a part of the vacated summary judgment order and judgments. And while our opinion in the first appeal did not foreclose the court from imposing CR 11 sanctions on remand, given the misleading nature of the argument to the court, we now conclude the law firms are no longer entitled to the CR 11 sanctions that were awarded against Fahim. See Biggs v. Vail, 124 Wn.2d 193, 198-199, 876 P.2d 448 (1994); Rhinehart v. Seattle Times Co., 51 Wn. App. 561, 580-81, 75 P.2d 1243 (1988).
In view of our holding, we need not reach Fahim's challenge to both the award of prejudgment interest and the imposition of CR 11 sanctions against Fahim's lawyer. Nonetheless, the record does not support the imposition of sanctions where, as here, tort claims were made by Fahim in the pro se complaint he filed in June 2003, months before Fahim retained the attorney to represent him.
Unless the court finds there was an extension of the six-year statute of limitations, on remand the court shall quiet title in Fahim to his house. We reverse and remand for further proceedings consistent with this opinion.