Opinion
No. 55680-1-I.
June 5, 2006.
Appeal from a judgment of the Superior Court for Snohomish County, No. 03-2-10563-3, Ellen J. Fair, J., entered January 7, 2005.
Counsel for Appellant(s), Bruce I. Fine, Aiken Fine PS, 2131 2nd Ave, Seattle, WA 98121-2207.
Counsel for Respondent(s), Joseph P. Wilson, Attorney at Law, 3014 Hoyt Ave, Everett, WA 98201-4005.
Affirmed by unpublished opinion per Schindler, A.C.J., concurred in by Agid and Becker, JJ.
William and Donna Stipek borrowed money for their business from Bel Air Briney (Bel Air), a general partnership and commercial lender. On November 20, 1998, Stipek signed a Deed of Trust Note (Note) for $106,000 and a Deed of Trust to secure the Note. The terms of the Note required interest-only monthly payments for twelve months and a balloon payment for the full amount on December 15, 1999. In the event of default, Bel Air could demand payment of the loan with interest. When Stipek was unable to make the balloon payment in December, Bel Air agreed to extend payment of the Note if Stipek paid an extension fee. In 2000, Stipek continued to make the same monthly interest-only payments but never signed or returned the extension fee agreement Bel Air sent. For the next two years, Stipek continued to make monthly interest-only payments and did not sign the extension fee agreements Bel Air sent him. In 2003, Stipek paid Bel Air the remaining amount due on the Note excluding the extension fees. Bel Air initiated a nonjudicial foreclosure action to recover the unpaid extension fees. Stipek filed a lawsuit to quiet title and restrain the foreclosure. Following a bench trial, the court concluded there was no agreement to pay the extension fees and the doctrines of account stated and equitable estoppel did not bar Stipek from contesting payment of the fees. The trial court quieted title, entered judgment in favor of Stipek, and awarded Stipek attorney fees based on a provision in the Note. On appeal, Bel Air challenges the trial court's decision and the findings of fact and conclusions of law. We conclude substantial evidence supports the trial court's findings and based on those findings, the doctrines of account stated and equitable estoppel do not apply. We also conclude the court did not err in awarding attorney fees to Stipek. We affirm the trial court in all respects.
FACTS
In 1998, William and Donna Stipek (Stipek) borrowed money for their business from Bel Air Briney (Bel Air), a commercial investment banking partnership. On November 20, 1998 Stipek signed a Deed of Trust Note (Note) and a Deed of Trust on Stipek's convenience store in Granite Falls to secure payment of the Note.
The principal sum of the Note was $106,000 with a twelve percent interest rate. Stipek agreed to make monthly interest-only payments of $1,060, with a balloon payment for the balance due on December 15, 1999. The Note provided Bel-Air with various remedies for late payments or default including late fees and payment of the entire principal amount with accrued interest at a default interest rate of twenty-four percent. According to Stipek, he planned to pay Bel Air at the end of the year by refinancing another contract. But before signing the Note, Stipek asked one of the Bel Air partners what would happen if he was unable to pay the balance of the loan when it became due in December. Stipek said he was told `[a]s long as you make your payments, I'm happy collecting the 12- percent interest.'
Stipek received a coupon book for interest-only monthly payments. Stipek made the monthly payments in 1999 but was unable to make the balloon payment at the end of the year. According to Stipek, Bel Air sent him a notice agreeing to extend payment on the Note if he paid an extension fee of $6,000. Stipek said that when he received the notice, he consulted his attorney. His attorney told him he was in default and Bel Air was entitled to demand payment of the balance on the Note at any time. Stipek testified that he decided not to sign and return the extension agreement, but instead continue making payments in the hope that Bel Air would not demand payment of the balance due.
Nick Briney, a partner of Bel Air, testified that he spoke to Stipek after he did not make the December 15 payment. According to Briney, Stipek agreed to pay the fee to extend payment on the Note. Briney said he spoke to Stipek again after he sent the written extension fee agreement, and Stipek said he would sign and return the agreement, but never did. Stipek testified that he did not have a conversation with Nick Briney or anyone else at Bel Air about the extension fee agreement.
When Stipek received the coupon book for 2000, the interest-only payment amount was the same as 1999, $1,060. Stipek said he increased his payments to $1,200 a month to try and pay down the principal in the event Bel Air demanded payment of the Note.
At the end of 2000, Bel Air sent Stipek another notice informing him it would extend payment on the Note for an additional year if he paid $8,000. Again, Stipek testified he had no conversations with anyone at Bel Air. Stipek said he received another extension agreement but as before he decided not to sign and return the agreement but instead continue making monthly interest-only payments in the hope that Bel Air would not demand payment of the entire amount due.
Nick Briney testified that Stipek said he would pay the $8,000 extension fee, but then did not sign the extension fee agreement Bel Air sent him. Stipek received another coupon book for 2001 with the same interest-only monthly payment amount of $1,060. In January 2001, Stipek made a payment of $9,200. Stipek testified the payment was an effort to pay down the loan. But Briney said he assumed Stipek was paying the $8,000 extension fee in addition to his regular payment. Stipek testified that he increased his monthly payments in 2001 to $1,500 a month to pay down the principal. The same pattern repeated itself at the end of 2001. Bel Air agreed to extend payment on the Note if Stipek paid $8,000. Bel Air sent Stipek an extension agreement but Stipek did not sign the agreement and continued to make interest-only monthly payments. While the monthly payment amount in 2001 was still $1,060, Stipek increased his monthly payments to $2,000 a month to pay down the principal.
At the end of 2002, Stipek received a letter from Bel Air informing him that he had to sign and return the extension agreement and pay the fee before Bel Air would agree to extend payment on the Note for 2003. Stipek decided to pay off the Note. Stipek calculated the amount owed excluding extension fees, and paid Bel Air. Bel Air agreed to accept Stipek's payment of the Note but reserved the right to seek reimbursement for the unpaid extension fees.
During the course of the loan, Stipek received monthly and annual statements from A F Trustee Services, the company that administered collection and the accounting of payments on the Note. The monthly statements reflected the payments received each month, and the application of those payments to the principal and interest due on the Note. The annual statements included the extension fees. Stipek testified that he did not read the annual statements, but did provide them to his accountant to prepare his taxes.
Bel Air filed a nonjudicial foreclosure action to obtain payment for the extension fees. Stipek sued to restrain the foreclosure sale and quiet title alleging the obligation on the Note secured by the Deed of Trust had been paid in full. Bel Air asserted a number of affirmative defenses including the doctrines of account stated and equitable estoppel.
Stipek also asserted a Consumer Protection Act claim which was dismissed.
Stipek and the two Bel Air partners testified at trial. The primary dispute was whether there was mutual assent between Bel Air and Stipek to pay the fees to extend payment on the Note. The court concluded the express terms of the Note did not include a provision for extending payment of the Note or for extension fees and there was no implied agreement to pay the fees. After Stipek paid $488 he owed in late fees, the court ruled he was entitled to his property free and clear of Bel Air's Deed of Trust. The trial court also awarded Stipek approximately $10,000 in attorney fees. Bel Air appeals.
ANALYSIS
Account Stated
Bel Air contends that the doctrine of account stated bars Stipek from contesting the extension fees. Bel Air claims the trial court erred in assuming that the doctrine of account stated requires mutual assent and Stipek impliedly agreed to pay the fees.
This court reviews the trial court's decision following a bench trial to determine whether the findings are supported by substantial evidence and whether those findings support the conclusions of law. Dorsey v. King County, 51 Wn. App. 664, 668-69, 754 P.2d 1255 (1988). Substantial evidence is a quantum of evidence sufficient to persuade a rational fair-minded person the premise is true. Wenatchee Sportsmen Ass'n v. Chelan County, 141 Wn.2d 169, 176, 4 P.3d 123 (2000). Questions of law and conclusions of law are reviewed de novo. Sunnyside Valley Irrigation Dist. v. Dickie, 149 Wn.2d 873, 879-880, 73 P.3d 369 (2003). We must defer to the trier of fact for purposes of resolving conflicting testimony and evaluating the persuasiveness of the evidence and credibility of the witnesses. Burnside v. Simpson Paper Co., 123 Wn.2d 93, 108, 864 P.2d 937 (1994). Boeing Co. v. Heidy, 147 Wn.2d 78, 87, 51 P.3d 793 (2002).
The doctrine of account stated generally applies to an open account where the amount a party owes at a given moment is difficult, if not impossible, to precisely determine. Rustlewood Ass'n v. Mason County, 96 Wn. App. 788, 798, 981 P.2d 7 (1999) (citing 6 Arthur Linton Corbin, Corbin on Contracts, sec. 1303 (1962)). In this situation, when a party presents an accounting and the other party assents to its correctness, the accounting establishes the amount of the debt owed.
As a matter of law, the doctrine of account stated requires some form of mutual assent to the accounting. `?[I]t must be mutually agreed between the parties that the balance struck thereon is the correct amount due from the one party to the other on the final adjustment of their mutual dealings to which the account relates.'" Rustlewood, 96 Wn. App. at 798 (quoting Shaw v. Lobe, 58 Wash. 219, 221, 108 P. 450 (1910). The parties must agree either explicitly or implicitly that the balance stated for the account is the correct amount due. And although a party's retention without objection of an account for an unreasonably long time may indicate assent, the mere rendition of an account from one to the other does not establish an account stated. An account stated is a `manifestation of assent by debtor and creditor to a stated sum as an accurate computation of an amount due the creditor.' Sunnyside Valley Irrig. Dist. v. Roza Irrig. Dist., 124 Wn.2d 312, 315-16, 877 P.2d 1283 (1994); Restatement (Second) of Contracts sec. 282(1) (1981).
Relying on Sunnyside, Bel Air argues Stipek implicitly agreed to pay the extension fees. In Sunnyside, our Supreme Court concluded there was mutual assent to an account stated even though there was no explicit agreement between the parties.
In that case, two irrigation districts, Sunnyside Valley and Roza, contracted with the United States Bureau of Reclamation to construct and maintain a system of drain channels. Under the contracts, Sunnyside agreed to perform irrigation construction and rehabilitation work, and Roza agreed to pay a percentage of the construction costs. Once the work was completed, Roza also agreed to pay Sunnyside fifty percent of the maintenance costs based on annual estimates. Roza paid the maintenance bills presented by Sunnyside for ten years. Roza then complained of poor maintenance and excessive costs, and refused to pay Sunnyside. Sunnyside sued Roza on the contracts; Roza counterclaimed that it had paid excessive maintenance costs. Sunnyside, 124 Wn.2d at 313-14.
Sunnyside asserted the doctrine of account stated barred Rosa's contract claim to recover allegedly excessive costs. Sunnyside argued that the charges for maintenance were part of an ongoing open account and when Roza paid the bills without protest, Roza in effect agreed to Sunnyside's accounting. Because there was no evidence at trial that Roza had paid the bills under protest, the Court concluded Roza implicitly agreed to Sunnyside's accounting. Sunnyside, 124 Wn.2d at 318.
Here, the facts are distinguishable from Sunnyside. In Sunnyside, Roza's conduct over the course of ten years was unequivocal. While over the years, Roza made some inquiries regarding the costs of the maintenance, there was no indication Roza did not agree that it owed the amounts billed and paid. First, this case does not involve an open account where the amount owed at a given moment is not easily ascertained. Secondly, in contrast to Sunnyside, the trial court concluded Stipek's conduct was equivocal and there was no express or implicit agreement to pay the extension fees. While Stipek did not object to the annual accounting statements from Bel Air that included the extension fees, the court found Stipek's refusal to sign and return the written extension fee agreements, despite prodding to do so every year, showed he did not agree to pay the extension fees. The trial court's conclusion that Stipek did not manifest an assent to pay the extension fees is supported by substantial evidence. Because there was not an explicit or implicit agreement to pay the extension fees, the trial court did not err in concluding the doctrine of account stated did not bar Stipek from contesting the fees.
Equitable Estoppel
In the alternative, Bel Air claims equitable estoppel bars Stipek from contesting the extension fees. According to Bel Air, the evidence demonstrated that Stipek agreed to pay the extension fees and Bel Air relied on that agreement in not demanding payment under the Note.
The elements of equitable estoppel are: (1) an admission, statement, or act inconsistent with a claim afterwards asserted, (2) action by another in reasonable reliance upon that act, statement or admission, and (3) injury from allowing a party to contradict or repudiate the prior act, statement or admission. Board of Regents v. Seattle, 108 Wn.2d 545, 551, 741 P.2d 11 (1987). Equitable estoppel must be shown by clear, cogent, and convincing evidence. Berschauer/Phillips Constr. Co. v. Seattle Sch. Dist. No. 1, 124 Wn.2d 816, 831, 881 P.2d 986 (1994); Lybbert v. Grant County, 141 Wn.2d 29, 35, 1 P.3d 1124 (2000).
The trial court decided that equitable estoppel did not apply because there was no `prejudice to Defendant by continuing to operate under the terms of the original Note,' and receiving twelve percent interest. While Bel Air claimed it was induced into not exercising the default remedy under the Note, the court observed that foreclosure was an `expensive proposition' and `would not necessarily be calculated to get Defendant all their money.' The court concluded that rather than being induced into not exercising the default remedies, the `[d]efendant made a tactical decision not to foreclose.'
Bel Air contends there was no evidence regarding the advantages to Bel Air of continuing to receive payments under the terms of the Note or the costs of foreclosure. But, the crux of the court's decision is that Bel Air did not prove it was prejudiced by continuing to receive a twelve percent interest rate of return instead of initiating foreclosure. While Nick Briney testified that if Stipek had not agreed to pay the extension fees, he would have `called the note and advanced the rate to the default rate,' there was no testimony explaining how Bel Air was prejudiced by continuing to accept Stipek's payments at twelve percent interest.
In addition, the evidence did not establish the other elements of equitable estoppel. The court's finding that Stipek did not agree to pay the extension fees is supported by the evidence and given Stipek's refusal to return phone calls or sign the extension agreements, Bel Air could not show it reasonably relied on Stipek's conduct in refraining from exercising its remedy of default. The trial court's decision that equitable estoppel did not prevent Stipek from contesting the extension fees is supported by the evidence.
Bel Air also asserts that when the trial court crossed out certain language in findings of fact 11 and 12, the court made an affirmative finding and these `negative findings' are not supported by the evidence. Bel Air cites no authority to support this argument. Cowiche v. Bosley, 118 Wn.2d 801, 809, 828 P.2d 549 (1992). (This court need not consider arguments unsupported by legal authority). In any event, the trial court did not make findings contrary to the language it crossed out and finding 11 stated: `Plaintiff adopted a deliberate and calculated strategy of ignoring phone calls.' The trial court crossed out this language and stated `[p]laintiff ignored phone calls.' This finding is supported by substantial evidence. In finding 12, the court crossed out the following sentence: `Plaintiff knew that the extension fees were being added to the principal each year and that the calculation of interest was based on a principal balance that included the extension fees. Plaintiff never objected to the accounting statements; he used the calculations on the AFTS statements to report interest on his federal tax returns.' Elsewhere in the findings, the court stated that the annual statements showed the application of the extension fees and `in a sense the Plaintiff clearly understood that the Defendants were seeking to levy fees.' We reject Bel Air's challenges to findings of facts 11 and 12.
Attorney Fees
Bel Air claims the trial court erred in awarding attorney fees to Stipek. The Note provides for attorney fees if `suit is brought to collect on this Note.' The trial court awarded fees to Stipek under this provision because the `Note was central to the resolution of the issues in the case.' Bel Air contends that Stipek's lawsuit to restrain the foreclosure sale was not a suit brought to collect on the Note and the court erred in awarding attorney fees.
Whether a particular statutory or contractual provision authorizes an award of attorney fees is a legal question which the appellate court reviews de novo. Schlener v. Allstate Ins. Co., 121 Wn. App. 384, 388, 88 P.3d 993 (2004).
Under RCW 4.84.330 in any action `on a contract' that specifically provides for attorney fees and costs to enforce the contract, the prevailing party `shall be entitled to reasonable attorney's fees in addition to costs.' An action is "on a contract" if the contract agreement is `central to the controversy.' Hemenway v. Miller, 116 Wn.2d 725, 742, 807 P.2d 863 (1991). Relying on Hemenway, Bel Air contends that Stipek's suit is not `on the Note' because the Note did not contain any provisions to extend payment of the Note or extension payments and, therefore, it was not necessary to interpret or enforce the provisions of the Note. In Hemenway, the original makers of a promissory note assumed the status of a surety when a third party assumed the obligation to pay the note. As sureties, they argued that the creditor's action in allowing a security interest in the collateral to lapse discharged their liability under the note. The primary issues at trial and on appeal in Hemenway involved application of the Uniform Commercial Code to questions of who is a surety and when a creditor's impairment of secured collateral is not `unjustifiable.' The Hemenway court denied the makers' motion for attorney fees under the promissory note because the note was not central to the controversy. When the underlying documents merely provide the background out of which the surety allegedly acquires new rights and duties by operation of law and by their voluntary actions in obtaining the assignee, it is apparent that the action is not `on the contract.'
Hemenway, 116 Wn. 2d at 743.
Unlike in Hemenway, Stipek's lawsuit to enjoin Bel Air's foreclosure on the Deed of Trust was inextricably connected to the Note. The Deed of Trust secured payment of the Note. The purpose of Bel Air's nonjudicial foreclosure action was to recover the additional amounts it alleged Stipek owed on the Note. The starting point for the court's analysis was to analyze the terms of the Note and both parties presented evidence regarding the provisions of the Note and the circumstances surrounding its execution. Even though the court's determination about whether the parties' agreement to extend payment of the Note included an agreement to pay extension fees required it to focus on the parties' conduct after execution of the Note, the Note was still central to the parties' dispute Bel Air also argues that this case is like CPL, L.L.C. v. Conley, 110 Wn. App. 786, 40 P.3d 679 (2002). In CPL, the parties entered into a memorandum agreement as an accord and satisfaction of a prior contract dispute. When one of the parties breached the memorandum agreement, the other sued to enforce it. Although the original contract had an attorney fees provision, the memorandum agreement did not. Because the lawsuit was brought under the memorandum agreement, the terms of that agreement governed and this court held the attorney fee provision in the original contract did not apply. CPL, 110 Wn. App. at 797-98. Unlike CPL, there is only one Note in this case and Stipek's lawsuit to restrain the foreclosure was based on the Note and Deed of Trust. The issue the court had to resolve was whether Stipek fulfilled his obligations under the Note. The Note was central to the controversy and the trial court did not err in awarding fees as provided in the Note.
We affirm the trial court's findings of fact and conclusions of law, the judgment in favor of Stipek, and the decision to award Stipek attorney fees.
BECKER and AGID, JJ., concur.