Mww, Pllc v. Ryan Smith ( 2013 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
MWW, PLLC, dba MORAN WINDES No. 68154-1-1
AND WONG, PLLC; and MORAN &
KELLER, PLLC, its successor, DIVISION ONE
Appellants,
v.
RYAN and JANE DOE SMITH, and the UNPUBLISHED
marital community composed thereof;
JOHN and JANE DOE GUARINO, and FILED: March 18.2013
the marital community composed
thereof; all individually and as
successors in interest to INTERACTIVE
OBJECTS, INC.; YARMUTH, WILSDON
CALFO, PLLC; RICHARD and JANE
DOE YARMUTH, and the marital
community composed thereof; and the
proceeds of the legal malpractice
settlement paid by or on behalf of
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Cox, J. — We must again decide the rights of competing creditors to th^
settlement proceeds arising from a prior legal malpractice action commenced in
March 2006. We handed down our prior decision in an appeal in that case on
June 30, 2008 in Smith v. Moran, Windes &Wong, PLLC.1
1 145 Wash. App. 459, 187 P.3d 275 (2008). review denied, 165Wn.2d 1032,203
P.3d281 (2009).
No. 68154-1-1/2
The primary issue that is now before us is whether the trial court properly
dismissed the claims in this new action, following our reversal and remand to the
trial court for further proceedings in the prior malpractice action. We hold that
MWW, PLLC (the "law firm") fails to state a claim for conversion upon which relief
could be granted. And the conversion claim that the law firm asserts is also
barred by the three year statute of limitations. On appeal, the law firm has
abandoned the foreclosure of attorney's lien claim asserted below. Thus,
dismissal of that claim is not properly before us. Accordingly, the trial court
properly dismissed both claims in this action.
We also hold that this appeal is frivolous. Thus, Yarmuth Wilsdon Calfo
PLLC, Richard and Jane Doe Yarmuth, (collectively "Yarmuth"), and Ryan and
Jane Doe Smith, and John and Jane Doe Guarino are entitled to an award of
reasonable attorney fees.
We affirm and remand to the trial court for a determination of the amount
of reasonable attorney fees to be assessed against the law firm.
Much of the background for this case is discussed in our prior decision.
There, we held that a lien for attorney fees against any settlement proceeds
arose at the commencement of that action in March 2006.2 We did not address
whether any contractual lien for attorney fees existed.3 We remanded for a
determination ofthe amount of the statutory attorney's lien4
2 Id at 467.
3 Id at 466.
4 Id. at 472.
No. 68154-1-1/3
Following the reversal and remand of the case to the trial court for further
proceedings, the parties to that case engaged in further litigation, the details of
which we need not discuss in detail.
In July 2011, the law firm commenced this new case, asserting two
causes of action: conversion and foreclosure on an attorney's fee lien.5 The law
firm named Ryan and Jane Doe Smith, John and Jane Doe Guarino, and
Yarmuth as defendants in this new case.
Yarmuth moved to dismiss the claims against it under CR 12(b)(6) for
failure to state a claim upon which relief could be granted and because the
claims were barred by the statute of limitations. Smith and Guarino joined this
motion. The trial court granted Yarmuth's motion to dismiss. The court also later
dismissed the law firm's claims against Smith and Guarino for the same reasons.
The law firm appeals.
CONVERSION
The law firm argues that the trial court erred when it dismissed its suit for
failure to state a claim upon which relief could be granted. We disagree, both
because the law firm cannot demonstrate that it has a meritorious conversion
claim and because, even if it could do so, this claim would be barred by the
statute of limitations.
"A trial court's ruling on a motion to dismiss for failure to state a claim
upon which relief can be granted under CR 12(b)(6) is a question of law . . . ."6
5 Clerk's Papers at 8.
6 Cutlerv. Phillips Petroleum Co.. 124 Wash. 2d 749, 755, 881 P.2d 216 (1994).
No. 68154-1-1/4
An appellate court will treat a CR 12(b)(6) motion as a motion for summary
judgment "when matters outside the pleading are presented to and not excluded
by the court."7 When reviewing an order of summary judgment, an appellate
court engages in the same inquiry as the trial court.8 Thus, it considers the facts
in the light most favorable to the nonmoving party.9 Summary judgment is only
appropriate if there is no genuine issue ofmaterial fact.10
"The tort of conversion is 'the act of willfully interfering with any chattel,
without lawful justification, whereby any person entitled thereto is deprived of the
possession of it.'"11 "Money, under certain circumstances, may become the
subject of conversion. However, there can be no conversion of money unless it
was wrongfully received by the party charged with conversion, or unless
such party was under obligation to return the specific money to the party
7 Sea-Pac Co.. Inc. v. United Food & Commercial Workers Local Union 44, 103
Wash. 2d 800, 802, 699 P.2d 217 (1985).
8 Right-Price Recreation. LLC v. Connells Prairie Cmtv. Council, 146 Wash. 2d 370,
381, 46 P.3d 789 (2002) (citing Wilson v. Steinbach, 96 Wash. 2d 434, 437, 656 P.2d 1030(1982)).
9 Indoor Billboard/ Wash.. Inc. v. Integra Telecom of Wash.. Inc.. 162 Wash. 2d 59,
70, 170P.3d10(2007).
10
Id.
11 Consulting Overseas Mamt. Ltd. v. Shtikel, 105 Wash. App. 80, 83, 18P.3d 1144
(2001) (quoting Wash. St. Bank v. Medalia Healthcare LLC. 96 Wash. App. 547, 554, 984
P.2d1041 (1999)).
No. 68154-1-1/5
claiming it."12 "Knowledge of a lien againstmoney does not make the
recipient liable for conversion.'™
Thus, in Davin v. Dowling.14 the supreme court held that the Third National
Bank of Walla Walla was not guilty of conversion for accepting money from
Dowling, its mortgagor, rather than turning the money over to Davin, who held a
first priority lien on this money:
It cannot be said that the bank, when it received the money
knowing that it was the proceeds of the crop and applied it on an
indebtedness of Dowling, did so wrongfully. Neither can it be said
that the bank was under any obligation to deliver the specific
money to Davin. . . No case has been cited, and in our
investigation we have been unable to find any, which holds
that simply the receipt of money by one charged with
knowledge that it comes from property which was the subject
of a lien makes the party guilty of the conversion of the
moneyP5]
Here, as the Davin court noted, the receipt of settlement proceeds by
Yarmuth, Smith, and Guarino with knowledge that such proceeds were subject to
a lien does not, by itself, make them liable for conversion of such proceeds.
Additionally, the record does not support any claim that Yarmuth "wrongfully
received" the settlement proceeds. To the contrary, the proceeds appear to have
been disbursed to Yarmuth by the settling party in the prior malpractice action in
12 Public Util. Dist. No. 1 of Lewis County v. Wash. Public Power Supply System.
104 Wash. 2d 353, 378, 705 P.2d 1195 (1985) (emphasis added).
13 Reliance Ins. Co. v. U.S. Bank of Wash.. 143 F.3d 502, 506 (1998) (emphasis
added) (interpreting Washington taw) (citing Davin v. Dowling, 146 Wash. 137, 140, 262
P. 123(1927)).
14 146 Wash. 137, 141, 262 P. 123(1927).
15 Id (emphasis added).
No. 68154-1-1/6
conformity with normal settlement practices. Likewise, there is nothing in the
record showing Yarmuth took money from the law firm. In short, the law firm fails
to make the required showing for a conversion cause of action. Dismissal for this
reason was proper.
The law firm argues that under RCW 60.40.010(d) the amount it was owed
is certain. But, because the law firm cannot make out a prima facie case for
conversion, whether or not the amount it claims it was owed is certain is of no
consequence.
The law firm next argues that the disbursal of the settlement funds by
Yarmuth from an IOLTA account constituted conversion. This argument is
flawed.
The law firm never obtained a stay of the trial court order dismissing its
original lien claim, nor did it delay the enforcement of this dismissal through the
supersedeas procedure allowed under RAP 8.1. Thus, disbursal of the
settlement funds by Yarmuth was neither wrongful nor an act of conversion.
Finally, even if the law firm could make out a conversion claim as to
Yarmuth based on the disbursal of funds, the law firm has failed to establish how
such a claim would apply to Smith and Guarino. The law firm argues that
respondeat superior would apply because when Yarmuth disbursed the funds, it
was acting on behalf of itself and its principals, Smith and Guarino. But, the law
firm provides no citations to support its argument. Where a party cites no
authority, we presume it has found none.16
16
State v. Young, 89 Wash. 2d 613, 625, 574 P.2d 1171 (1978).
No. 68154-1-1/7
The law firm also argues that Rule of Professional Conduct (RPC)
1.15A(g) and RCW 60.40.010(d) together make clear that respondent's
disbursement of the settlement funds constitutes conversion. This assertion is
legally untenable.
RPC 1.15A(g) states that:
If a lawyer possesses property in which two or more persons
(one of which may be the lawyer) claim interests, the lawyer must
maintain the property in trust until the dispute is resolved. The
lawyer must promptly distribute all undisputed portions of the
property. The lawyer must take reasonable action to resolve the
dispute, including, when appropriate, interpleading the disputed
funds.
The law firm argues that Yarmuth's disbursal of the settlement funds
violated this RPC and consequently was an act of conversion. This assertion is
directly contrary to settled law. As the respondents note, the supreme court
made clear in Hizev v. Carpenter the "breach of an ethics rule provides only a
public, e.g., disciplinary, remedy and nota private remedy.'*7 Simply stated,
the law firm does not have a remedy by way of a conversion claim or otherwise
against Yarmuth for an alleged breach of this or any other of the RPCs.
Finally, for the first time an appeal, the law firm appears to claim that
Yarmuth, Smith, and Guarino were unjustly enriched and that it is consequently
entitled to restitution as a result. Under RAP 9.12, an appellate court does not
consider new arguments made for the first time on appeal when reviewing a
17119 Wash. 2d 251, 259, 830 P.2d 646 (1992) (emphasis added).
7
No. 68154-1-1/8
grant ofa motion for summary judgment.18 Thus, we do not address this new
argument.
Statute of Limitations
The law firm's conversion claim is also barred by RCW 4.16.080(2), the
three year statute of limitations. For this additional reason, the dismissal of this
claim was proper.
Under RCW 4.16.080(2), the statute of limitations to bring a suit for
conversion is three years. "An action for taking, detaining, or injuring personal
property, including an action for the specific recovery thereof, or for any other
injury to the person or rights of another" shall be commenced within three
years.19 This three year period begins to run from "'the time when plaintiff first
became entitled to sue.'"20
A threshold issue is what date of accrual applies to the law firm's
conversion claim. Here, the record shows that this claim accrued from the date
the law firm sought prejudgment interest. This is the date on which the law firm
believed its claim for conversion was liquidated. As Yarmuth correctly argues,21
according to the law firm's own Complaint, that date was "on the date the
18 Behnke v. Ahrens, Wn. App. , 294 P.3d 729, 737 (2012).
19 RCW 4.16.080.
20 Jones v. Jacobson. 45 Wash. 2d 265, 269, 273 P.2d 979 (1954) (quoting Young
v. City of Seattle, 30 Wash. 2d 357. 361. 191 P.2d 273 (1948)).
21 Brief of Respondents Yarmuth Wildson Calfo PLLC and Richard and Jane Doe
Yarmuth at 20.
8
No. 68154-1-1/9
defendants first received the Settlement proceeds in 2007 and or the date they
first misappropriated the trust funds from the IOLTA account."22
This allegation, which centers on 2007 as the relevant date for accrual of
the conversion claim, is consistent with the following statement in our prior
opinion on these settlement proceeds: "We note that at oral argument counsel
for Smith and Guarino represented to this court that settlement proceeds have
been paid to their clients."23 This representation shows that at the time of oral
argument of the prior case, the settlement proceeds had been disbursed to Smith
and Guarino. Oral argument of the prior case was before the June 30, 2008 filing
of our earlier decision. Thus, the law firm's representation to this court during
oral argument makes clear that the conversion claim accrued, at the latest,
before June 30, 2008.
Using either the 2007 date, as stated in the law firm's own complaint, or
any date before June 30, 2008, the date of our prior decision, as the time of
accrual of the conversion claim, the result is the same. The conversion claim
accrued more than three years before the commencement of this action on July
18, 2011. Therefore, the law firm's conversion claim is also barred under RCW
4.16.080(2)'s three year statute of limitations.
The law firm does not address the accrual date of its conversion claim.
Rather, without citation to legal authority, the law firm argues that the first date
that it could have filed this action for conversion was March 25, 2009. That date,
22 Clerk's Papers at 9 (emphasis added).
23 Smith, 145 Wn. App. at 472 (emphasis added).
No. 68154-1-1/10
according to the law firm, was the date the mandate was issued in the appeal in
the prior malpractice action. We decline to consider argument unsupported by
cogent legal argument or citation to relevant authority.24
Equally unpersuasive is the law firm's next argument—that this action "is
on a contract," and thus the six year statute of limitations for contract claims
applies. The law firm's complaint does not plead a contract cause of action.
Rather, it asserts conversion and foreclosure on attorney's fee lien as the only
two causes of action. Thus, there is no merit to any contention that a contract
claim's statute of limitations applies in this case.
We note that the law firm cites RCW 4.16.030 in support of its argument
that a six year statute of limitations applies. But this statute addresses actions
"to enforce any lien for any special assessment for [any] local improvements"
and provides a ten year statute of limitations.25 Obviously, neither special
assessments nor local improvement districts are involved in this action.
We also conclude that the law firm has abandoned on appeal any claim
that dismissal of its foreclosure of attorney's lien claim was improper. Though it
asserted in its complaint a "foreclosure on attorneys [sic] fee lien," it did not
pursue that claim on appeal. Specifically, there is neither an assignment of error
nor an identification of any issue on appeal for this claim.26 Its arguments are,
24 See RAP 10.3(a)(5) (appellate briefshould contain argument in support of
issues presented for review, together with citations to legal authority); see also Cowiche
Canyon Conservancy v. Boslev, 118 Wash. 2d 801, 809, 828 P.2d 549 (1992) (court need
not address arguments unsupported by citation to relevant authority).
25 RCW 4.16.030 (emphasis added).
26 Appellants' Opening Brief at 4-5.
10
No. 68154-1-1/11
instead, focused solely on its conversion claim, which we addressed previously in
this opinion. For these reasons, we need not address whether the trial court's
dismissal of that cause of action was improper.
JUDICIAL ESTOPPEL
The law firm also argues that the respondents are judicially estopped from
arguing that the statute of limitations bars its conversion claim. This argument
has no merit.
'"Judicial estoppel is an equitable doctrine that precludes a party from
asserting one position in a court proceeding and later seeking an advantage by
taking a clearly inconsistent position.'"27 "[T]he 'heart ofthe doctrine [of judicial
estoppel] is the prevention of inconsistent positions as to facts. It does not
require counsel to be consistent on points of law.'"28 Though not exhaustive,
three central questions guide a trial court's determination of whether to apply
judicial estoppel:
(1) whether a party's current position is inconsistent with an
earlier position, (2) whether judicial acceptance of
an inconsistent position in the later proceeding will create the
perception that the party misled either the first or second court, and
(3) whether the party asserting the inconsistent position will obtain
an unfair advantage or impose an unfair detriment on the opposing
party if not estopped.[29]
27 Arkison v.Ethan Allen. Inc.. 160 Wash. 2d 535, 538, 160 P.3d 13 (2007) (quoting
Bartlev-Williams v. Kendall. 134 Wn, App. 95, 98, 138 P.3d 1103 (2006)).
28 Anfinson v. FedEx Ground Package Svs. Inc.. 159 Wash. App. 35, 63, 244 P.3d
32 (2010) (quoting King v. Clodfelter. 10 Wash. App. 514, 521, 518 P.2d 206 (1974)
{alternations in original)).
29 Id. at 61-62.
11
No. 68154-1-1/12
A lower court's application of the doctrine of judicial estoppel is reviewed
for abuse ofdiscretion.30 The lower court here rejected the law firm's judicial
estoppel argument and dismissed the law firm's claims.
As noted above, an appellate court reviews a CR 12(b)(6) dismissal that
looks to documents outside the pleadings as it would an order for summary
judgment.31 It reviews a summary judgment order de novo.32
Here, the law firm argues that Smith, Guarino, and Yarmuth are estopped
from arguing that the running of the statute of limitations bars the law firm's
conversion claim. The law firm's claim rests on the argument that all
respondents previously represented to this court that the statute of limitations did
not preclude its refiling its attorney's fee lien claim. Thus, according to the law
firm, Yarmuth, Smith, and Guarino are estopped from now arguing that the
statute of limitations precludes the law firm's conversion claim. This argument is
incorrect for a number of reasons.
First, any factual assertions made by Smith and Guarino cannot estop
Yarmuth from making arguments here because it was not a party in the prior
action. Judicial estoppel is a relatively flexible doctrine and "may be invoked by a
stranger to the first suit against a party who was a party to, or a witness in, the
first suit."33 Here, the law firm invokes the doctrine against neither a party nor a
30 Arkison, 160 Wn.2d at 538.
31 Mueller v. Miller. 82 Wash. App. 236, 246, 917 P.2d 604 (1996).
32 Arkison. 160 Wn.2d at 538.
3314A Karl B. Tegland, Washington Practice: Civil Procedure § 35:57, at
595 (2d ed. 2009).
12
No. 68154-1-1/13
witness in the previous suit. While Yarmuth represented Smith and Guarino in
the prior action, it was neither a party to nor a witness in that action.
Consequently, it is not bound by Smith and Guarino's arguments there.
Second, even if Yarmuth was bound by Smith and Guarino's prior factual
contentions, Smith and Guarino did not allege any factual position with respect to
conversion in the previous litigation that they contradict here. They could not, in
fact, because a claim for conversion was not at issue there. Thus, nowhere in
the prior litigation did Smith and Guarino explicitly rely on the statute of limitations
not having run on the law firm's conversion claim.
Even if a conversion claim were not at issue here, in the earlier litigation
Smith and Guarino did not rely on the running of the statute of limitations as to
the law firm's attorney's lien. In the previous litigation, Smith and Guarino stated
that the law firm "fail[ed] to make any showing . . . why, in this instance, the
dismissal without prejudice constitutes a final judgment. . . ."34 It is true that
when the statute of limitations has run on a claim, a dismissal without prejudice
as to that claim is appealable as a matter of right.35 Thus, by inference, Smith
and Guarino did indicate that the law firm itself failed to allege that the statute of
limitations had run. But the law firm's failure to allege a particular fact is not
equivalent to Smith and Guarino's reliance on that fact. Thus, neither Smith and
34
Clerk's Papers at 367.
35 See Munden v. Hazelrigg, 105 Wash. 2d 39, 44, 711 P.2d 295 (1985) (where
statute of limitations had not run and filing of new action was possible no appeal from
dismissal without prejudice).
13
No. 68154-1-1/14
Guarino nor Yarmuth are judicially estopped from arguing a statute of limitations
defense to the law firm's claims here.
The law firm relies on Johnson v. Si-Cor, Inc.36 It argues that because
privity of the parties is inapplicable to judicial estoppel, Yarmuth is bound by any
factual argument made by Smith and Guarino in the prior case. But Si-Cor does
not support such a contention. There, the court concluded that "the doctrine [of
judicial estoppel] may be applied even if the two actions involve different
parties."37 But the court was not indicating that judicial estoppel may be applied
against a person uninvolved in a prior action.
In Si-Cor, the court considered whether Johnson was judicially estopped
from suing Si-Cor, Inc. because he failed to reveal this claim in his prior
bankruptcy proceedings.38 Thus, Si-Cor, a new party, attempted to judicially
estop Johnson, a party in the previous action, from making an argument it
claimed he had contradicted in his previous litigation.39 Here, in contrast, the law
firm, a party in the previous action, is attempting to judicially estop Yarmuth from
making an argument a different party made in an earlier proceeding. There is
no support for such an expansion of the judicial estoppel doctrine.
The law firm also argues that this court's denial of discretionary review in
the previous proceedings demonstrates that Smith, Guarino, and Yarmuth
36 107 Wash. App. 902, 28 P.3d 832 (2001).
37 id at 907-08.
38 id at 904-05.
39 id
14
No. 68154-1-1/15
"clearly argued in the appellate court that [the law firm] could not bring the appeal
because [the law firm] could merely refile and have its claim accepted."40 It did
not. This court's denial of discretionary review stated that "the appellant [the law
firm] does not assert that a statute of limitations would bar refiling the
[litigation]."41 This language demonstrates that, to the extent the statute of
limitations question arose, it was the law firm's failure to assert a legal statute of
limitations argument, rather than Smith's and Guarino's assertion of this
argument. Thus, Smith and Guarino are not judicially estopped from arguing that
the statute of limitations bars the law firm's claims.
ATTORNEY'S FEE LIEN AND QUANTUM MERUIT
In its Reply Brief, the law firm argues for the first time that it is "at least
entitled to quantum meruit" based on its attorney's fee lien claim.
While the law firm pleaded claims for conversion and "foreclosure on
attorneys [sic] fee lien" in its complaint, it made no quantum meruit argument in
its opening brief on appeal. Arguments first raised in a reply are not generally
addressed.42 Accordingly, we do not address this tardy claim.
ATTORNEY FEES
Yarmuth, Smith, and Guarino all request attorney fees under RAP 18.9.
because this action is frivolous. We agree.
RAP 18.9(a) "permits an appellate court to award a party attorney fees as
sanctions, terms, or compensatory damages when the opposing party files a
40 Appellants' Opening Brief at 20.
41 Clerk's Papers at 215.
42 Cowiche Canyon, 118 Wn.2d at 809; see RAP 10.3(c).
15
No. 68154-1-1/16
frivolous appellate action."43 "'[A]n appeal is frivolous if there are no debatable
issues upon which reasonable minds might differ, and it is so totally devoid of
merit that there was no reasonable possibility of reversal.'"44 The court considers
the record as a whole.45 "All doubts as to whether the appeal is frivolous should
be resolved in favor of the appellant."46
Here, the sole claim that is properly asserted on appeal is that the trial
court improperly dismissed the law firm's conversion claim. The law firm
abandoned the foreclosure of lien claim that it pleaded below by failing to argue
that claim on appeal.
The conversion claim is frivolous. Neither the pleadings nor this record
supports the assertion of this claim, for the reasons we previously explained in
this opinion.
Both the allegations in the law firm's complaint as well as the reference in
this court's prior opinion to representations made at oral argument in that case
show when the conversion cause of action accrued. The law firm makes no
contrary argument regarding when accrual occurred. Thus, the statute of
limitations on the conversion claim plainly ran well before the July 18, 2011
commencement of this action.
43 Advocates for Responsible Dev. v. W. Wash. Growth Mgmt. Bd.. 170Wn.2d
577, 580, 245 P.3d 764 (2010).
44 Stanley v. Cole. 157 Wash. App. 873, 889, 239 P.3d 611 (2010) (quoting Streater
v. White. 26 Wash. App. 430, 435, 613 P.2d 187 (1980) (alterations in original)).
45 id
46 Advocates for Responsible Dev.. 170 Wn.2d at 580.
16
No. 68154-1-1/17
Rather than deal with the uncontested fact of when the cause of action
accrued, the law firm argues, without citation to authority, that it timely
commenced this case on the basis of when the mandate was issued in the prior
case. How issuance of the mandate in the prior case would have precluded
commencing an action for conversion against Yarmuth, who was not a party to
the prior action, remains unexplained. This remarkable argument based on
issuance of the mandate makes neither legal nor practical sense.
For these reasons, we conclude this appeal is frivolous. An award of
attorney fees is proper, subject to compliance with governing rules. We remand
to the trial court for a determination of the amount of fees on appeal to be
awarded to Yarmuth, Smith, and Guarino.47
We affirm the orders before us on appeal.
6m{J?
WE CONCUR:
f<-4td{ C
47 RAP 18.1(i).
17