Opinion
No. 61364-2-I.
November 24, 2008.
Appeal from a judgment of the Superior Court for King County, No. 06-2-40553-6, Palmer Robinson, J., entered February 8, 2008.
Affirmed by unpublished opinion per Dwyer, A.C.J., concurred in by Ellington and Appelwick, JJ.
RE Investors LLC appeals the denial of its motion for leave to amend its complaint against the Knollwood Condominium Association. RE Investors moved to amend months after the trial court ruled on cross-motions for summary judgment brought by the parties and dismissed all of RE Investors' claims on the merits. RE Investors also appeals the denial of its motion seeking attorney fees and sanctions against Knollwood, as well as an award of attorney fees to Knollwood. Both parties seek attorney fees on appeal. We affirm the trial court's judgment in its entirety and award attorney fees on appeal to Knollwood.
I
RE Investors purchased unit #302 in the Knollwood condominium complex at a trustee sale after the unit's previous owner defaulted on her mortgage payments. At the time, Knollwood had a recorded lien of $5,213.05 on unit #302 for delinquent assessments. Soon after RE Investors purchased unit #302, it resold it. However, the escrow company handling the resale, Rainier Title, learned of the lien on the property and retained $10,000 of the purchase price in escrow.
RE Investors independently determined that it was required to pay only $1,044 to satisfy the delinquent assessments on unit #302 and mailed a check for that amount to Knollwood, along with a demand that Knollwood release the lien. Knollwood responded that RE Investors' calculation of the assessments owed was incorrect and declined to release the lien.
RE Investors then filed suit against Knollwood. RE Investors' complaint did not name Rainier Title as a party, did not seek release of any funds from escrow, did not seek declaratory relief with respect to the amount of assessments properly owing on unit #302 following the trustee sale, and did not seek to require that Knollwood release the lien against the unit. Instead, the complaint asserted that because Knollwood "will not agree to release the funds held in escrow at time of sale of the subject property," RE Investors "has been damaged in the amount of $10,000." Based solely on this assertion and citing only RCW 64.34.364 (a section of the Condominium Act) as a basis for recovery, RE Investors requested judgment against Knollwood for the amount of the claimed damages, plus attorney fees.
Chapter 64.34 RCW.
Knollwood answered, denying liability and counterclaiming against RE Investors for the still-unpaid assessments on unit #302 and for an award of attorney fees pursuant to RCW 64.34.455, the Condominium Act's fee-shifting provision. Knollwood pleaded damages on its counterclaim of "an amount to be proven at trial."
RE Investors then moved for summary judgment on all claims. Knollwood responded with a cross-motion for summary judgment, also on all claims. The trial court denied Knollwood's cross-motion with respect to its own counterclaim, "without prejudice," but granted Knollwood's cross-motion on RE Investors' claims, dismissing all of those claims with prejudice. RE Investors neither moved the court to reconsider this ruling nor appealed from the trial court's summary judgment order.
Nearly two months later, RE Investors filed a pleading styled "MOTION FOR LEAVE TO FILE AMENDED COMPLAINT." The pleading failed to articulate why the trial court's prior judgment had been erroneous or to explain a rationale for attempting to amend a complaint that had previously been dismissed with prejudice. Knollwood opposed RE Investors' motion to amend, contending that RE Investors was attempting to relitigate an issue that had previously been adjudicated to conclusion.
In reply, RE Investors filed another pleading, this time styled "SUPPLEMENT TO MOTION FOR LEAVE TO FILE AMENDED COMPLAINT." Attached to this pleading was a newly drafted complaint asserting a new legal theory — that Knollwood's condominium declaration created a right of action to recover damages based on funds withheld by Rainier Title — but alleging no change of circumstances or other facts not in existence at the time that RE Investors' original claim was filed. According to RE Investors, consideration of this theory was warranted because Knollwood had declined to provide RE Investors with its condominium declaration, instead responding in discovery: " These documents are public records and may be obtained from the King County Recording Office. The cost of obtaining and copying these documents is the same for either party." RE Investors had not previously challenged the adequacy of Knollwood's discovery responses, or independently sought and examined the Knollwood condominium declaration prior to filing suit.
The trial court denied RE Investors' motions. The court's order contained a hand-written notation stating: "Plaintiff's complaint was dismissed with prejudice on March 6, 2007. Plaintiff may not now assert a different claim based on the same set of facts."
RE Investors immediately moved the court to reconsider its ruling based on RE Investors' claim that the Knollwood condominium declaration allowed for the recovery of fewer delinquent assessments than did RCW 64.34.364(3).
The relevant portion of the declaration states:
Where a mortgagee of a mortgage of record or other purchaser obtains possession of a unit as a result of mortgage foreclosure (including sale under deed of trust), such possessor and his successors and assigns shall not be liable for the share of the common expenses or assessments by the Association chargeable to such unit which became due prior to such possession, but will be liable for the common expenses and assessments coming due after such possession.
(Emphasis added.)
In response to this filing, Knollwood voluntarily refunded to RE Investors the $1,044 that RE Investors had independently determined to be owing and had paid toward the outstanding assessments, released its lien on unit #302, and moved to dismiss its counterclaim.
The court granted Knollwood's motion to dismiss its counterclaim and denied RE Investors' motion for reconsideration. The order included a ruling striking the court's original stated rationale for denying RE Investors' request to amend, substituting the following language:
Plaintiff's complaint was dismissed with prejudice on November 6, 2007. There is no complaint to "amend." Whether plaintiff's "new" claims are barred by res judicata and/or collateral estoppel are reserved [sic] to the trial judge if and when plaintiff files a new
RE Investors has not filed a new complaint against Knollwood.
Knollwood then sought and was granted attorney fees by the trial court. RE Investors also moved for an award of attorney fees and for sanctions against Knollwood. The motion contended that, notwithstanding that the trial court had dismissed RE Investors' claims on the merits, it should enter judgment in RE Investors' favor and award RE Investors attorney fees. The court denied RE Investors' motion.
RE Investors appeals.
II
RE Investors contends that the trial court erred by denying RE Investors' motion for leave to amend its complaint against Knollwood. We disagree.
We review a denial of leave to amend after the pleadings have closed for a manifest abuse of discretion. Ino Ino, Inc. v. City of Bellevue, 132 Wn.2d 103, 142, 937 P.2d 154, 943 P.2d 1358 (1997).
Pursuant to CR 15(a), a party may amend a pleading once as a matter of course at any time before service of a responsive pleading, but thereafter "only by leave of court or by written consent of the adverse party." Such leave should be freely given and denied only when delay, dilatory practice, or prejudice to the nonmoving party are shown. Tagliani v. Colwell, 10 Wn. App. 227, 234, 517 P.2d 207 (1973). However, "[w]hen a motion to amend is made after the adverse granting of summary judgment, the normal course of proceedings is disrupted and the trial court should consider whether the motion could have been timely made earlier in the litigation." Doyle v. Planned Parenthood of Seattle-King County, Inc., 31 Wn. App. 126, 130-31, 639 P.2d 240 (1982).
Here, there is no serious question that RE Investors could have timely moved to amend its complaint, or that it unreasonably delayed in so doing. RE Investors' first attempted amendment contained no facts that could not have been included in the original filing. Its second attempted amendment asserted a legal theory based on evidence — Knollwood's condominium declaration — that it could easily and inexpensively have obtained at any time before summary judgment was entered, including prior to filing suit.
The trial court properly denied RE Investors' motion for leave to amend.
III
RE Investors next contends that the trial court abused its discretion by declining to enter an order sanctioning Knollwood. The gist of RE Investors' argument is that the trial court was required to sanction Knollwood for two reasons: first, because misrepresentations in Knollwood's filings and inadequate investigation into the factual basis of Knollwood's counterclaim made CR 11 sanctions mandatory, and, second, because Knollwood's counterclaim necessarily constituted a frivolous lawsuit within the meaning of RCW 4.84.185. Neither of these contentions withstands scrutiny.
We review a trial court's denial of sanctions based on allegations of CR 11 violations or frivolous filings for abuse of discretion. Wash. State Physicians Ins. Exch. Ass'n v. Fisons Corp., 122 Wn.2d 299, 338, 858 P.2d 1054 (1993); Fluke Capital Mgmt. Servs. Co. v. Richmond, 106 Wn.2d 614, 625, 724 P.2d 356 (1986). "A trial court abuses its discretion when its order is manifestly unreasonable or based on untenable grounds." Fisons, 122 Wn.2d at 339.
"A complaint must lack a factual or legal basis before it can become the proper subject of CR 11 sanctions. . . . Even then, 'the court cannot impose CR 11 sanctions unless it also finds that the attorney who signed and filed the complaint failed to conduct a reasonable inquiry into the factual and legal basis of the claim.'" IBF, LLC v. Heuft, 141 Wn. App. 624, 637, 174 P.3d 95 (2007) (internal citations omitted) (quoting Bryant v. Joseph Tree, Inc., 119 Wn.2d 210, 219-20, 829 P.2d 1099 (1992)). Whether an attorney failed to make a reasonable inquiry into the factual and legal bases for a claim is "evaluated by an objective standard, meaning the court should ask whether a reasonable attorney in similar circumstances could believe his or her actions were factually and legally justified." Roeber v. Dowty Aerospace Yakima, 116 Wn. App. 127, 142, 64 P.3d 691 (2003) (citing Bryant, 119 Wn.2d at 220).
RE Investors' complaint in this action made no mention of any legal authority other than RCW 64.34.364. RE Investors' contention that sanctions were mandated is based on its assertion that Knollwood was obligated to determine that RCW 64.34.364(3) was not the governing law prior to filing its counterclaim. Under this reasoning, RE Investors itself would have been no less subject to mandatory CR 11 sanctions than would have been Knollwood — it similarly failed to discover that the Knollwood condominium declaration, not RCW 64.34.364(3), governed the determination of the appropriate amount of outstanding assessments on unit #302. Under these circumstances — where RE Investors, as the party initiating the lawsuit, represented that a certain statute governed the resolution of the action, and the defending party, Knollwood, simply asserted a counterclaim based on the same statute — it was not unreasonable, much less sanctionable, for Knollwood not to have looked beyond the pleadings and ferreted out evidence undermining its own position. The trial court did not abuse its discretion by so ruling.
IV
RE Investors next contends that the trial court abused its discretion both by awarding attorney fees to Knollwood and by declining to award attorney fees to RE Investors. According to RE Investors, Knollwood was not the "prevailing party" because Knollwood voluntarily dismissed its counterclaim after the entry of summary judgment against RE Investors on all of RE Investors' claims. According to RE Investors, notwithstanding that its own claims were dismissed with prejudice early in the litigation, Knollwood's voluntary dismissal of its counterclaim required not only that attorney fees not be awarded to Knollwood, it required that the trial court make an affirmative determination that RE Investors was the prevailing party in the lawsuit and award fees to RE Investors pursuant to RCW 4.84.250. Knollwood responds that RCW 4.84.250 is inapplicable here. Each party further contends that it is entitled to an award of fees pursuant to RCW 64.34.455 and that the other party is not so entitled. We conclude that RCW 4.84.250 is inapplicable and that the trial court properly awarded attorney fees to Knollwood pursuant to RCW 64.34.455.
Generally, we will not overturn a decision to grant or deny attorney fees absent a manifest abuse of trial court discretion. However, the question of whether a statute applies to a factual situation is a question of law and is fully reviewable on appeal. Mackey v. Am. Fashion Inst. Corp., 60 Wn. App. 426, 429, 804 P.2d 642 (1991).
Knollwood further contends that RE Investors did not properly contest Knollwood's request for attorney fees in the trial court. This argument is specious. Even a cursory review of the pleadings filed with respect to RE Investors' request for attorney fees and contemporaneous objection to Knollwood's request makes clear that RE Investors was opposing an award of fees to Knollwood, and on what grounds it was doing so.
Both RCW 4.84.250 and RCW 64.34.455 allow an award of fees to the "prevailing party" in an action. RCW 64.34.455 provides that "[t]he court, in an appropriate case, may award reasonable attorney's fees to the prevailing party," thus conferring any award of fees to the discretion of the trial court. On the other hand, an award of fees to the prevailing party pursuant to RCW 4.84.250 is mandatory in actions where $10,000 or less is pleaded as damages and a request for an award of fees is made.
Contrary to Knollwood's contention, awarding fees when the terms of the statute are met is not "discretionary" with the trial court. See, e.g., LRS Elec. Controls, Inc. v. Hamre Const., Inc., 153 Wn.2d 731, 745, 107 P.3d 721 (2005) (award of fees under statute is "as of right"); Absher Const. Co. v. Kent Sch. Dist. No. 415, 77 Wn. App. 137, 148, 890 P.2d 1071 (1995) (under statute, "award of attorneys' fees to the prevailing party is mandatory").
However, RCW 4.84.250 does not apply if the party seeking relief has not pleaded an amount of damages within the statutory limit. RCW 4.84.250 specifically states that its provision of attorney fees is allowed only "where the amount pleaded by the prevailing party as hereinafter defined" is $10,000 or less. (Emphasis added.) The subsequent statutory sections distinguish the amount pleaded in a counterclaim from the amount pleaded in the complaint initiating the lawsuit. The "prevailing party" for purposes of an unsuccessful counterclaim is "the party resisting relief" — i.e., the party defending against the counterclaim, here RE Investors. That party is entitled to an award of fees only if "the amount pleaded, exclusive of costs, is equal to or less than the maximum allowed under RCW 4.84.250," or $10,000. RCW 4.84.270 (emphasis added).
In this case, Knollwood did not plead damages of $10,000 or less on its counterclaim; it pleaded an amount "to be proven at trial." At a minimum, RCW 4.84.250 requires that the amount pleaded as damages be $10,000 or less. Reynolds v. Hicks, 134 Wn.2d 491, 502, 951 P.2d 761 (1998); In re Estate of Tosh, 83 Wn. App. 158, 165, 920 P.2d 1230 (1996). Moreover, Knollwood did not assert RCW 4.84.250 as the basis for its demand of attorney fees on its counterclaim. Instead, Knollwood pleaded that any award of attorney fees to which it would be entitled would be "based upon the recorded declaration and Chapter 64.34 RCW." (Emphasis added.) While expressly pleading RCW 4.84.250 is not required when the amount of the claim pleaded is $10,000 or less, Tosh, 83 Wn. App. at 165, it cannot be said that sufficient notice of the intent to seek fees under the statute is given where there is both an unspecified amount of damages pleaded and an entirely separate statute is pleaded as the basis for any award of fees. Because RCW 4.84.250 does not apply to Knollwood's voluntarily dismissed counterclaim, the trial court did not err by declining to make a fee award pursuant to that statute.
In some cases — such as personal injury cases, where by statute no general damage amount may be pleaded — constructive notice of the precise amount sought as damages may be communicated via a postfiling settlement offer, making the pleading requirements more lenient than is indicated by the text of RCW 4.84.250. See Beckmann v. Spokane Transit Auth., 107 Wn.2d 785, 790-91, 733 P.2d 960 (1987). This exception to the rule has, in one instance, been extended to apply in a non-personal-injury case. See Schmerer v. Darcy, 80 Wn. App. 499, 509-10, 910 P.2d 498 (1996). But no postfiling settlement offer was made in this case.
In contrast with RCW 4.84.250, the determination of the prevailing party for purposes RCW 64.34.455 is not statutorily set, but rather is left to the discretion of the trial court. RE Investors' contention that the trial court necessarily abused that discretion by determining that Knollwood was the prevailing party for purposes of RCW 64.34.455 amounts to nothing more than an unsupported assertion that this is not an "appropriate case" for an award of fees within the meaning of that statute. But, of course, what constitutes an "appropriate case" is precisely that which has been committed to "the broad discretion afforded by the statute to the trial court." Eagle Point Condo. Owners Ass'n v. Coy, 102 Wn. App. 697, 714, 9 P.3d 898 (2000). Where, as here, a plaintiff files meritless claims pursuant to the Condominium Act, and the defendant voluntarily dismisses its counterclaim upon obtaining summary judgment against the plaintiff, a trial court does not abuse its discretion by determining that the defendant is the "prevailing party" for purposes of an attorney fee award. None of the authority to which RE Investors cites suggests, much less mandates, the opposite conclusion. Moreover, this conclusion is consistent with the purpose of RCW 64.34.455, "to punish frivolous litigation and to encourage meritorious litigation," which this court has stated should be the "central consideration" in deciding how the Condominium Act's fee shifting statute should be applied. Eagle Point, 102 Wn. App. at 712-13.
We affirm the trial court's award of attorney fees to Knollwood and its decision not to award fees to RE Investors.
In its briefing, RE Investors also requested that we remand this cause due to the trial court's failure to enter findings of fact and conclusions of law supporting its attorney fee award. However, at oral argument, RE Investors expressly withdrew any challenge to the amount of Knollwood's attorney fee award, clarifying that it was challenging only Knollwood's entitlement to an award of attorney fees. Because we have resolved this question in Knollwood's favor, remand is unnecessary, notwithstanding the absence of findings and conclusions.
V
Both parties request attorney fees on appeal pursuant to RAP 18.1. Nothing in RE Investors' appeal casts any doubt onto Knollwood's entitlement to attorney fees, much less the superior court's denial of RE Investors' various motions. Because Knollwood is the prevailing party on appeal as well as in the trial court, it is entitled to an award of attorney fees on appeal pursuant to RCW 64.34.455.
Affirmed.