Opinion
No. 64021-6-I.
April 4, 2011. UNPUBLISHED OPINION
Appeal from a judgment of the Superior Court for Skagit County, No. 06-2-00229-9, Dave Needy, J., entered August 14, 2009.
Affirmed in part and reversed in part by unpublished opinion per Grosse, J., concurred in by Dwyer, C.J., and Appelwick, J.
Under the mandatory arbitration rules a party who appeals an arbitration award and fails to improve its position following a trial de novo is required to pay costs and attorney fees. Here, the parties' contract specifically provided that any dispute would be resolved by applying the mandatory arbitration rules. At the trial de novo, the plaintiff recovered a judgment for a lesser amount than awarded at arbitration. Thus, the defendant was entitled to attorney fees. We reverse the trial court's award of attorney fees to Frontier Industries, Inc. and affirm its award of attorney fees to Cascade Mountain Corporation.
FACTS
On July 25, 2005, Susan St. John, the owner and registered agent of Cascade Mountain Corporation (Cascade), completed a credit application, opening an account at Frontier Industries, Inc. (Frontier) for the purchase and installation of windows. St. John signed the application, including a personal guarantee. Cascade received delivery of approximately 27 windows. After delivery, Frontier sued Cascade for $5,518.64, the amount still owing. Cascade answered, admitting that it owed $2,033.25. Cascade also counterclaimed for other unspecified damages amounting to less than $10,000 that resulted from its having to hire other installers to measure and install the windows. On February 5, 2006, Cascade offered to settle for $2,233.00. Frontier rejected the offer and on May 8, 2007, the parties went to arbitration.
After a three-day hearing, the arbitrator awarded $6,422.43 in damages to Frontier and, in an amended award, attorney fees of $5,897.70, for a total award of $12,320.13. Both parties sought a trial de novo.
The arbitrator had originally entered an order only for the damage portion of the claim and not for attorney fees. It subsequently amended its order on July 17, 2007, awarding the total amount of $12,320.13 which included the award of principal, interest and reasonable attorney fees and costs.
Cascade appealed the arbitration on May 30, 2007, and Frontier appealed on August 3, 2007.
Cascade offered to settle for $5,750.00 on November 5, 2007. Frontier rejected that offer and the matter went to trial on September 23, 2008. At the trial de novo, the court found that the parties had agreed to a window package order of $5,533.25 and that St. John had paid a $3,500.00 down payment, leaving a balance of $2,033.25 still owing to Frontier. The trial court awarded attorney fees to Cascade, assessing those fees and costs against Frontier for its failure to improve its position at the trial de novo under Mandatory Arbitration Rule (MAR) 7.3 and RCW 7.06.060. The trial court then awarded Frontier $65,831.74 attorney fees and costs that it had expended up through the arbitration hearing under the parties' contract. It then offset that amount by the attorney fees awarded Cascade ($19,430.00) arriving at a net amount due to Frontier of $46,401.74.
Cascade appeals contending the trial court erred in awarding attorney fees to Frontier for the arbitration proceeding. Frontier cross-appeals, contending that the trial court erred in determining that only St. John was authorized to place any orders for Cascade. Frontier contends that John Gillette, Cascade's employee, acted as though he had authority to place additional window orders for Cascade. Frontier argues that it relied on Gillette's apparent authority incurring additional costs which should have been included in the damages assessed against Cascade.
ANALYSIS
Attorney Fees
In an installment contract the parties specifically agreed to apply the mandatory arbitration rules to resolve any disputes. The contract provides:
RCW 4.84.330 makes the unilateral attorney fee provision bilateral. See Wachovia SBA Lending, Inc. v. Kraft, 165 Wn.2d 481, 489, 200 P.3d 683 (2009) ("By its plain language, the purpose of RCW 4.84.330 is to make unilateral contract provisions bilateral.").
(6) In the event of default, the applicant agrees to pay actual attorneys fees, necessary disbursements and taxable costs including deposition costs and expert witness fees. In the event a dispute cannot be resolved, the dispute will be decided according to the mandatory arbitration rules with the county in which suit is filed, regardless of the amount in dispute. The prevailing party shall be the one party in whose favor a net monetary judgment is entered.
Here, Frontier requested a trial de novo following an arbitrator's award in its favor but failed to improve its position. Applying MAR 7.3, as required by the contract, the trial court found Cascade to be the prevailing party. MAR 7.3 provides:
The court shall assess costs and reasonable attorney fees against a party who appeals the award and fails to improve the party's position on the trial de novo. The court may assess costs and reasonable attorney fees against a party who voluntarily withdraws a request for a trial de novo. "Costs" means those costs provided for by statute or court rule. Only those costs and reasonable attorney fees incurred after a request for a trial de novo is filed may be assessed under this rule.
Similarly, RCW 7.06.060(1) provides in pertinent part:
The superior court shall assess costs and reasonable attorneys' fees against a party who appeals the award and fails to improve his or her position on the trial de novo.
Thus, the trial court was correct in holding Frontier responsible for Cascade's costs and reasonable attorney fees at the trial de novo. However, the trial court erred when it determined that Frontier was entitled to attorney fees for the arbitration hearing. In doing so, the trial court failed to recognize that the parties contracted to resolve the dispute under MAR. Under MAR, Frontier is not entitled to any fees.
Frontier's argument that the trial court's award of substantial attorney fees for its costs during the arbitration makes it the prevailing party is without merit. Frontier conflates the award of attorney fees with the compensatory fees. Although it is true that Frontier could not just appeal the award of attorney fees without also appealing the compensatory damages, the fact that the trial court would have awarded higher attorney fees for the arbitration than those actually awarded is immaterial. In Tran v Yu, this court held that the trial court should "compare comparables" when determining whether a party failed to improve its position. And inNiccum v. Enquist, we held that the trial court properly subtracted costs and fees when determining whether a party failed to improve its position. Here, Frontier received a lower amount in compensatory damages than it did at the arbitration. Hence, it failed to improve its position. MAR 7.3 is intended to encourage parties to accept the arbitration award by penalizing unsuccessful appeals from the award. Thus, under both the contract and MAR 7.3, Cascade is the prevailing party.
See Malted Mousse, Inc. v. Steinmetz, 150 Wn.2d 518, 79 P.3d 1154 (2003).
118 Wn. App. 607, 612, 75 P.3d 970 (2003).
152 Wn. App. 496, 501, 215 P.3d 987, 990 (2009).
Tribble v. Allstate Prop. Cas. Ins. Co., 134 Wn. App. 163, 174, 239 P.3d 373 (2006).
Credit Application
Frontier argues that the trial court erred in finding that St. John was the sole person authorized to place orders under the contract. We review the trial court's decision following a bench trial to determine whether the findings of fact are supported by substantial evidence and whether those findings support the conclusions of law. Here, the trial court found that the credit application that Susan St. John signed individually and in her capacity as owner of Cascade indicated that she was the sole person authorized to make charges to the account. The application itself stated that no one else had purchasing authority. Thus, Frontier had a duty to verify and seek authorization before making charges to her account.
Dorsey v. King County, 51 Wn. App. 664, 668-69, 754 P.2d 1255 (1988).
An agent's authority to bind a principal may be either actual or apparent. Apparent authority requires objective manifestations to be made to a third party. "Apparent authority may be inferred only from the acts of the principal, not from the acts of the agent." Apparent authority will only be found if two things are manifest. Those manifestations must
King v. Riveland, 125 Wn.2d 500, 507, 886 P.2d 160 (1994).
Smith v. Hansen, Hansen Johnson, Inc., 63 Wn. App. 355, 363, 818 P.2d 1127 (1991).
Hansen v. Horn Rapids O.R.V. Park of the City of Richland, 85 Wn. App. 424, 430, 932 P.2d 724 (1997).
first . . . cause the one claiming apparent authority to actually, or subjectively, believe that the agent has authority to act for the principal. Second, they must be such that the claimant's actual, subjective belief is objectively reasonable
King, 125 Wn.2d at 507.
Because Frontier was a party to the written contract and that document clearly set forth St. John as the sole individual authorized to make charges to the account, Frontier's subjective belief that Gillette was an apparent agent of Cascade is not objectively reasonable.
On August 21, 2009, Frontier moved to reopen the judgment for additional discovery of information gleaned from the bankruptcy filing of St. John. Frontier's affidavit indicated that Gillette and another person owned a 2 percent share of Cascade, and Gillette held a third mortgage on the property. The trial court entered an order for Cascade to produce its corporate records. Frontier's brief indicates that the records were not fully produced. The only document produced was the 2006 corporate tax minutes, which indicated that Gillette was Cascade's chef/grounds keeper. Nevertheless, on September 14, 2010, the trial court reviewed the additional information and concluded that its findings of fact and conclusions of law remained the same as previously entered. However, notwithstanding the above, Frontier failed to produce documentation sufficient to sway the trial court to revise its opinion. The findings of fact and conclusions of law on the issue of agency are supported by the record. The credibility of witnesses is a matter for the trial court. There was no agency. Attorney Fees on Appeal
That order was not part of the record. Accordingly, Frontier filed a motion to designate additional clerk's papers to supplement the record with the trial court's order of September 14, 2010. The motion to supplement the record with the order is granted.
A party entitled to fees under MAR 7.3 is also entitled to fees on appeal if the appealing party again fails to improve its position. Cascade is entitled to fees on appeal upon compliance with RAP 18.1.
Tribble, 134 Wn. App. at 174; Yoon v. Keeling, 91 Wn. App. 302, 306, 956 P.2d 1116 (1998).
In conclusion, we affirm the trial court's award of damages to Frontier and attorney fees to Cascade, but reverse the attorney fee award to Frontier. And, we award Cascade its fees on appeal.