Subway Real Estate, Llc v. Rebecca J. Armour ( 2019 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
SUBWAY REAL ESTATE, LLC, a C")
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Delaware limited liability company, No. 77510-3-1 '
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Appellant, DIVISION ONE
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REBECCA J. ARMOUR, aka •• a)C•01
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REBECCA J. WILSON, an individual,
Respondent. FILED: January 14,2019
APPELWICK, C.J. — Subway, a lessee, brought an unlawful detainer action
against sublessee, Wilson. The trial court found that under the leases Subway's
lessor, not Subway, was the proper party to bring the unlawful detainer action
against Wilson. The trial court dismissed with prejudice Subway's claims and
awarded Wilson attorney fees. Subway argues that its claims should have been
dismissed without prejudice, and that the court erred in awarding attorney fees.
We affirm.
FACTS
Seawest Investment Associates LLC leased space in Kirkland to Subway
Real Estate LLC. Subway then subleased the premises to franchisee Rebecca
Armour, also known as Rebecca Wilson (Wilson), for Wilson to operate a Subway
restaurant. The sublease required Wilson to pay rent directly to Seawest, the
landlord under the master lease.
No. 77510-3-1/2
On January 6, 2017, Seawest served Subway with a 10 day notice to
comply or vacate, alleging that Subway owed $20,865.44 in outstanding rent and
late fees.1 On April 26, 2017, Subway served Wilson with a notice to pay
outstanding rent or vacate within five days. Subway then filed an unlawful detainer
action against Wilson on May 4, 2017. In response, Wilson argued that she did
not owe rent, but was actually owed credit for repairs she had made.
In its order of dismissal, the trial court observed that Wilson is obligated to
pay rent to Seawest, not Subway. And, it stated that Wilson had rent-offset rights2
that she can exercise only against Seawest, not Subway. The trial court concluded
that Subway was not liable for Wilson's counterclaims, and that Subway was not
the proper party to bring the unlawful detainer action against Wilson. The court
then dismissed without prejudice Subway's claims against Wilson.
Wilson moved for attorney fees under a fee provision in the sublease and
RCW 4.84.330. Subway opposed the motion. Subsequently, the trial court filed
an amended order of dismissal, dismissing Subway's claims "with prejudice,"
"because Subway has no standing to assert such claims against[Wilson]on behalf
of the Landlord, Seawest." Wilson then moved for attorney fees based on the
1 The notice is dated January 6, 2016, but is also stamped as "received
[January] 11, 2017." (Capitalization omitted.)
2 While counterclaims are generally not allowed in unlawful detainer
proceedings, there is an exception when the counterclaim, affirmative equitable
defense, or set-off is based on facts which excuse a tenant's breach. Munden v.
Hazelrigq, 105 Wash. 2d 39, 45, 711 P.2d 295 (1985).
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amended order of dismissal. The trial court granted the motion, awarding Wilson
attorney fees pursuant to RCW 4.84.330. Subway appeals.3
DISCUSSION
Subway asserts that the trial court erred in dismissing its claims "with
prejudice," and in awarding Wilson attorney fees. It does not argue that dismissal
was improper, but instead asserts that the trial court's original disrriissal without
prejudice was correct, and that the trial court erred in amending its order to a
dismissal with prejudice.
I. Dismiss with Prejudice
Subway argues that its claims against Wilson should not have been
dismissed with prejudice. It asserts that(1)there was no decision on the merits of
all of Subway's claims against Wilson, and (2) Subway "has to be in a position to
assert its breach of contract claims" under the sublease against Wilson in a future
action that Seawest may bring against both it and Wilson.
CR 41(a)(4) provides the trial court with the discretion to make the dismissal
with prejudice in an appropriate case. Escude v. King County Pub. Hosp. Dist. No.
2, 117 Wash. App. 183, 192, 69 P.3d 895 (2003). "'A trial court's discretion under
CR 41(a)(4) to order dismissal with prejudice should be exercised only in limited
circumstances where dismissal without prejudice would be pointless." Gutierrez
v. Icicle Seafoods, Inc., 198 Wash. App. 549, 557, 394 P.3d 413 (2017) (quoting
Escude, 117 Wash. App. at 187). A voluntary dismissal is a final judgment when the
3 Subway appeals the amended order of dismissal, the order denying its
motion for reconsideration, and the order granting Wilson's motion for attorney
fees.
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court elects to dismiss with prejudice, because then it does not leave the parties
as if the action had never been brought. Elliott Bay Adjustment Co., Inc. v.
Dacumos, 200 Wash. App. 208, 214, 401 P.3d 473 (2017). The court's decision to
dismiss with prejudice bars the plaintiff from bringing the same claim against the
defendant. See id.
Subway's complaint alleged that Wilson failed to pay rent and was still in
possession of the premises. Subway asked the trial court to terminate the
sublease, restore its rights to the premises, and enter a judgment against Wilson
for outstanding rent, damages, and attorney fees. Unlawful detainer actions are
brought pursuant to RCW 59.12.030, which 'provides generally for a summary
proceeding to determine the right of possession as between landlord and tenant.
Munden, 105 Wash. 2d at 45. The action is a narrow one, limited to the question of
possession and related issues such as restitution of the premises and rent. Id.
Under the sublease, Wilson owed rent to Seawest, not Subway.
Consequently, Subway did not have standing to bring the unlawful detainer action.
The trial court did not err in concluding that dismissal was required. The lack of
standing will not change. Therefore, dismissal without prejudice would have been
pointless. The trial court did not err in dismissing with prejudice.
Subway contends that the trial court did not reach its breach of contract
claims against Wilson. That is true. But, even if it could have brought the unlawful
detainer action, contract claims are outside the scope of the unlawful detainer
action, and must be raised in a separate action. The trial court took no action to
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rule on any putative contract claims Subway may choose to assert subsequently
in such an action.
II. Attorney Fees
Subway argues that the trial court should not have awarded Wilson attorney
fees under RCW 4.84.330, because to receive an award Wilson must have been
entitled to a final judgment. And, Subway argues that the court "did not resolve
the issue of whether [Wilson] owed unpaid rent to Subway under the subcontract
between those two parties."
An award of attorney fees is proper when authorized by the parties'
agreement, by statute, or by a recognized ground in equity. Hous. Auth. v. Bin,
163 Wash. App. 367, 377, 260 P.3d 900 (2011).
Subway relies on Wachovia SBA Lending, Inc. v. Kraft, 165 Wash. 2d 481,
492, 200 P.3d 683 (2009). In Wachovia, our Supreme Court defined a final
judgment as "'[a] court's last action that settles the rights of the parties and
disposes of all issues in controversy." Id. (quoting BLACK'S LAW DICTIONARY 859
(8th ed. 2004)). The court held that a voluntary dismissal is not a final judgment
by this definition because it "leaves the parties as if the action had never been
brought." Id. Wachovia differs from this case, because there the court asked
whether there is a prevailing party under RCW 4.84.330 when the trial court
dismisses without prejudice. Id. at 490. Here, the trial court dismissed with
prejudice, and Subway cannot refile the unlawful detainer action against Wilson.
The purpose of RCW 4.84.330 is to make unilateral contract provisions
bilateral. Id. at 489. The statute expressly awards fees to the prevailing party in a
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contract action. Id. It further protects its bilateral intent by defining a prevailing
party as one that receives a final judgment. Id.
The sublease between Subway and Wilson contains an attorney fee
provision. The trial court dismissed Subway's claims with prejudice, which is a
final judgment in favor of Wilson. Thus, pursuant to RCW 4.84.330, the trial court
did not err in awarding Wilson attorney fees and costs.
III. Attorney Fees on Appeal
Wilson asks this court to award her attorney fees on appeal. Because
Wilson is the prevailing party on appeal, she is entitled under the sublease to an
award of attorney fees for this appeal, subject to compliance with RAP 18.1. Bin
163 Wash. App. at 378.
We affirm.
WE CONCUR:
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