Julia Mccord, Appellants/cr-respondents v. Cmdg Investments, Llc, Respondent/cr-appellant ( 2013 )

it." r p
ST,
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
JULIA McCORD, a Washington resident
THE CONJUNCTIONAL PATRIOTIC No. 68946-1-1
SOVEREIGN PATHWAY, and
RYAN & WAGES, LLC, a Washington DIVISION ONE
limited liability company,
Appellants/
Cross-Respondents,
v.
CMDG INVESTMENTS, LLC, an UNPUBLISHED OPINION
Oregon limited liability company,
FILED: Novembers, 2013
Respondent/
Cross-Appellant.
Becker, J. — When a party agrees that a person is the manager of a
limited liability company at one point in time and binding arbitration has
established that he was still the manager at a later point in time, the party is
collaterally estopped from bringing another suit to establish that the person was
not the manager in the intervening time period, absent some showing of changed
circumstances. Because no such showing was made here, we affirm the order of
summary judgment dismissing appellants' suit on grounds of collateral estoppel.
No. 68946-1-1/2
The lawsuit included a contract-based claim by the limited liability
company and a tortious interference claim by individual members of the
company. Because the contract provided only the background out of which the
tortious interference claim arose, the court did not err in denying respondent's
request to assess attorney fees against the individual members.
BACKGROUND
Ryan &Wages LLC was formed by Doris Ryan and Tom Wages as a real
estate venture in 2004. In December of 2005, Doris Ryan died and her interest
passed to her heirs, her daughter Julia McCord and her son Floyd Ryan. Floyd
Ryan's interest is held by the "Conjunctional Patriotic Sovereign Pathway." We
will refer to McCord, Ryan, and the Pathway collectively as "the heirs." This
appeal involves a dispute between the heirs and CMDG Investments LLC, an
Oregon limited liability company.
In 2005, Ryan &Wages contracted with CMDG to form Redding Lake
Stevens LLC. It is undisputed that Tom Wages was initially the manager of this
new entity. The purpose of Redding Lake Stevens was to develop two
properties—one in Lake Stevens, Washington, and the other in Redding,
California. Ryan &Wages owned the Lake Stevens property and held an option
to purchase the property in California. CMDG held 50 Class B units of Redding
Lake Stevens. Under the Redding Lake Stevens operating agreement, CMDG's
50 Class B units carried management control and voting rights. Ryan &Wages
held 50 Class A units of Redding Lake Stevens, which carried no management
control and limited voting rights. Importantly, the Redding Lake Stevens
2
No. 68946-1-1/3
agreement contains a bilateral attorney fee clause awarding costs and fees to
any prevailing party in an action to enforce or interpret any provision of the
agreement. The Ryan & Wages LLC operating agreement has no such attorney
fee provision.
The project in Redding, California, was built, but it turned out that the Lake
Stevens property could not be successfully developed due to sewer issues. This
reduced the financial prospects for Redding Lake Stevens. As a result, CMDG
proposed to amend the Redding Lake Stevens agreement to adjust ownership
interests. Wages and the heirs did not agree about how to respond to CMDG's
proposal. As a result of this conflict and other concerns regarding Wages'
management of Ryan & Wages, in 2008 the heirs sought to add themselves as
managers of Ryan & Wages by vote. They purported to act under article 6.4 of
the Ryan & Wages agreement, which states that, at a meeting called expressly
for that purpose, "any Manager may be removed at any time, with or without
cause, by the affirmative vote of Members holding at least two-thirds of all
interests in the Company's capital."
Wages, acting as manager of Ryan & Wages, executed the first
amendment to the Redding Lake Stevens agreement in February 2009 over the
heirs' objections. It was agreed that the Lake Stevens property could not be
developed in the manner or on the timeline assumed in the original operating
agreement. The amendment guaranteed monthly distributions from Redding
Lake Stevens to Ryan & Wages, but it provided that Redding Lake Stevens could
stop making these distributions at any time with a lump sum distribution of $1.25
No. 68946-1-1/4
million to Ryan & Wages. Redding Lake Stevens made the lump sum distribution
in December 2010.
FIRST LAWSUIT—ARBITRATION BETWEEN THE HEIRS AND WAGES
In April 2009, Wages filed suit against the heirs, asserting they had acted
without authority when they attempted to remove him as manager of Ryan &
Wages and to install themselves as managers in his place. The heirs then
brought a separate claim against Wages for misappropriation of funds. The two
actions were consolidated and, pursuant to a mandatory arbitration clause in the
Ryan & Wages agreement, ordered into binding arbitration.
The arbitrator was to resolve, among other issues, management conflicts
among Ryan & Wages members. In a decision dated November 25, 2009,
arbitrator Tod Nichols found that the heirs' attempt to remove Wages as manager
was ineffective:
The managing member is Tom Wages. The efforts of McCord and
Ryan to remove Mr. Wages as managing member are contrary to
the LLC Operating Agreement and the amendments thereto. First,
there is a contradiction in that paragraph 6.2c.a allows for removal
of the managing member by unanimous vote of members owning
60% of the profit interest and 60% of the capital interest in the
company, while paragraph 6.4 provides that a manager may be
removed by the affirmative vote of members holding at least two-
thirds of all interest in the LLC's capital. The specific governs the
general and paragraph 6.2c should control.
No. 68946-1-1/5
SECOND LAWSUIT—THE HEIRS SUE REDDING LAKE STEVENS
One month after the arbitration order was entered, the heirs filed a second
suit against Wages, this time adding Redding Lake Stevens as a defendant. As
part of this second suit, the heirs petitioned the trial court to remove Wages as
manager of Ryan &Wages. Wages counterclaimed for dissolution of the
company, which the heirs did not oppose. By order dated January 14, 2010, the
court ordered that Wages was removed as manager. The court declined to
appoint a new manager in Wages' place. The court dismissed all claims against
Redding Lake Stevens on summary judgment and awarded fees and costs to
Redding Lake Stevens under the prevailing party attorney fee clause in the
Redding Lake Stevens agreement. The heirs' claims against Wages proceeded
to trial.
At trial, the main issue involved allocation of the $1.25 million previously
distributed to Ryan &Wages by Redding Lake Stevens. The court found that
Wages was the managing member of Ryan &Wages when itfirst formed in
2004. Finding of fact 1. The court also noted that the arbitrator had not removed
Wages as manager and found that "Mr. Wages was removed as manager by
court order on January 14, 2010." Finding of fact 11. The court ordered judicial
dissolution of Ryan &Wages. Finding of fact 6. The court ordered that Wages
was not to have any access to the remaining balance of the $1.25 million lump
sum that had been distributed to Ryan &Wages. The court authorized the heirs
to disburse these funds to themselves to repay their capital account balances
after making necessary payments to third party creditors. This decision was
No. 68946-1-1/6
affirmed by this court in Ryan & Wages, LLC v. Wages. No. 68253-9-1, 2013 WL
1164786 (Wash. Ct. App. Mar. 18, 2013).
THIRD LAWSUIT—THE HEIRS AND RYAN & WAGES SUE CMDG
INVESTMENTS
The present appeal is from a third suit in which the heirs are parties. The
defendant is CMDG. The complaint brings two causes of action against CMDG,
one for breach of contract and one for tortious interference. The two heirs and
Ryan & Wages are all designated as "Plaintiff in the caption of the case.
The complaint alleges that CMDG breached the Redding Lake Stevens
agreement by signing the amendment with Wages in February 2009 because
CMDG knew or should have known that Wages could not sign on behalf of Ryan
& Wages.
The complaint also alleges that CMDG tortiously interfered with the heirs'
personal, contractual relationship between themselves and Wages (embodied in
the Ryan & Wages agreement) by treating Wages as a speaking agent for Ryan
&Wages even though they knew he was no longer a manager of Ryan &Wages.
Both claims were dismissed on summary judgment on the ground of
collateral estoppel four months after the complaint was filed. The claims both
depend on the factual assertion that Wages was no longer the manager of Ryan
&Wages in February 2009 when he signed the amendment. The trial court
concluded that prior litigation had already conclusively established that this
factual assertion is incorrect; Wages was the manager when he signed the
amendment. The heirs and Ryan & Wages (together "appellants") appeal this
decision.
No. 68946-1-1/7
The court awarded attorney fees to CMDG against Ryan & Wages for both
the breach of contract claim and the tortious interference claim. The trial court
declined CMDG's request to impose liability for attorney fees jointly and severally
on the heirs personally. CMDG cross appeals the decision rejecting the
imposition of joint and several liability on the heirs.
DISCUSSION
COLLATERAL ESTOPPEL
We first consider the heirs' contention that they are not collaterally
estopped from bringing this action.
Collateral estoppel applies where (1) the issue previously decided is
identical to the one presently contemplated, (2) the prior action ended in a final
judgment on the merits, (3) the party to be estopped was a party or in privity to a
party in the prior action, and (4) the application of the doctrine would not work an
injustice. State v. Vasquez, 148 Wash. 2d 303, 308, 59 P.3d 648 (2002). The
appellants challenge elements one and four only. Appellant's Br. at 17-18.
Absent a showing of changed circumstances, Wages was manager
continuously from formation (2004) to removal (2010)
Appellants assert that Wages lacked authority to bind Ryan &Wages
when he executed the amendment to the Redding Lake Stevens agreement on
February 1, 2009, because he was either (1) not the manager of Ryan &Wages
or (2) if he was the manager, he lacked authority to execute the first amendment
because he failed to get the written approval of members holding at least two-
No. 68946-1-1/8
thirds of all capital interests pursuant to article 6.6(g) of the Ryan & Wages
agreement. Appellant's Br. at 14-15.
The arbitrator unequivocally concluded in November 2009 that "[t]he
managing member is Tom Wages. The efforts of McCord and Ryan to remove
Mr. Wages as managing member are contrary to the LLC Operating Agreement
and the amendments thereto."
CMDG contends that Wages' authority to enter into the first amendment
was resolved by these findings. Appellants argue this is not so because the
arbitrator did not specifically find that Wages was the sole manager in February
2009 when the first amendment was executed.
Absent a showing of changed circumstances, a finding of fact at one point
in time will be conclusive as to others. Malland v. State, 103 Wash. 2d 484, 694
P.2d 16 (1985). In Malland, the Supreme Court considered a consolidated
appeal from orders of the Director of Retirement Systems cancelling the disability
retirement allowances of both a police officer and a firefighter. Malland. 103
Wash. 2d at 485.
The Supreme Court rejected the department's position, concluding "there
must be some showing of a change of circumstances before a disability
allowance may be canceled." Malland, 103 Wash. 2d at 486. Because the
department had not shown changed circumstances, collateral estoppel applied:
"Sometimes, there is a lack of total identity between the
matters involved in the two proceedings because the events in suit
took place at different times. In some such instances, the overlap
is so substantial that preclusion is plainly appropriate. . .. [I]n the
absence of a showing of changed circumstances, a determination
8
No. 68946-1-1/9
that, for example, a person was disabled ... in one year will be
conclusive with respect to the next as well."
Malland, 103 Wash. 2d at 489-90 (alterations in original), quoting Restatement
(Second) of Judgments § 27 cmt. c (1982).
Under Malland. collateral estoppel bars appellants from claiming, in the
present lawsuit, that Wages was not the manager in February 2009. The
following facts are undisputed: Thomas Wages became the manager of the
Ryan & Wages in 2004 when the entity was formed. Per the arbitrator, Thomas
Wages was the sole manager of Ryan & Wages in November 2009. The trial
court in the second lawsuit removed Thomas Wages as manager by order dated
January 14, 2010. Absent some evidence to the contrary, Wages was the
manager continuously from 2004 to January 2010.
Appellants contend the issues are not identical because the arbitrator did
not specifically find that Wages was also the manager in February 2009. This is
significant, they argue, because they claim they added themselves as co-
managers in 2008 pursuant to article 6.2 of the Ryan & Wages agreement.
However, the argument that the heirs had made themselves co-managers was
an issue before the arbitrator. The arbitrator declined to find that the heirs were
co-managers. He found that Wages was "the" manager.
We conclude collateral estoppel applies to bar relitigation of whether
Wages was the manager in February 2009.
No. 68946-1-1/10
As manager, Wages had express authority to sign the first
amendment
Appellants argue in the alternative that even if Wages had been the sole
manager when he executed the first amendment in February 2009, his action
was ineffective because he failed to comply with article 6.6(g) of the Ryan &
Wages agreement.1
Article 6.6(g) of the Ryan & Wages agreement places constraints upon the
manager's authority to sell assets. The manager may "sell or otherwise dispose
of all or substantially all of the assets of the Company" upon a vote of members
holding at least a two-thirds interest in the company's capital.2
As CMDG correctly points out, the first amendment to the Redding Lake
Stevens agreement did not result in a sale of any assets. Before executing the
first amendment, Ryan & Wages held 50 Class A shares of Redding Lake
Stevens. After executing the amendment, Ryan &Wages still owned 50 Class A
shares. The only things that the amendment changed were the calculation and
quantity of guaranteed payments due Ryan & Wages. Previously, the payments
were to be based on the rent collected as a result of the anticipated development
on the Lake Stevens property. After the first amendment, Ryan &Wages would
receive payments of $11,000 per month beginning in February 2009 until
1The parties also refer to this provision as article 8.3. Because we perceive no
substantive difference between the two, we will refer to article 6.6(g).
2Article 8.3 appears in the section entitled "Rights of Members" and states:
"Approval of Sale of All Assets. The Members may approve the sale, exchange, or
other disposition of all or substantially all of the Company's assets by an affirmative vote
of Members holding at least two-thirds of all interests in the Company's capital." Clerk's
Papers at 413 (emphasis in original).
10
No. 68946-1-1/11
Redding Lake Stevens made a $1.25 million lump sum payment, a payment that
would be triggered by any sale of the Redding Lake Stevens property.
Because the first amendment did not work a sale of all or substantially all
the assets of Ryan & Wages, article 6.6(g) is inapplicable. In its absence, the
third addendum to the Ryan & Wages agreement controls. The third addendum
authorizes the manager "to perform all acts and to execute all necessary
documents on behalf of the LLC related to the LLC's membership interest in
Redding Lake Stevens, LLC." Wages, who at the time was the manager, had
express authority to sign the first amendment.
Collateral estoppel is consistent with justice because parties had a
full and fair opportunity to litigate these issues
Appellants argue that application of collateral estoppel will cause injustice.
They say the arbitrator's decision was "at best, vague, ambiguous, and
inconclusive" because the "execution of the First Amendment was not central to
the arbitrator's decision." Appellant's Br. at 18.
The requirement that application of collateral estoppel not work an
injustice rests primarily on whether the prior suit afforded the party a full and fair
opportunity to litigate the issue. Robinson v. Hamed, 62 Wash. App. 92, 100, 813
P.2d 171. review denied, 118Wn.2d 1002(1991). According to the arbitrator's
decision, the parties presented him with eight issues. The arbitrator's decision
resolved each issue. In resolving management issues, the arbitrator determined
that Wages was "the managing member." The arbitrator necessarily had to
decide the merit of the appellants' claim that the heirs added themselves as co-
managers in 2007. The arbitrator did not find that Wages was "a" manager but
11
No. 68946-1-1/12
rather found that he was "the" manager. We conclude appellants had a full and
fair opportunity to litigate before the arbitrator their claim that the heirs added
themselves as co-managers, and the application of collateral estoppel does not
work an injustice.
The relative capital interests of the parties are irrelevant
Appellants finally argue that both collateral estoppel and summary
judgment were inappropriate because the arbitrator did not determine the capital
interests respectively held by Wages and the two heirs. The issue of capital
accounts was before the arbitrator, but it was not decided. The arbitration
decision states, "There is insufficient testimony and evidence provided to
calculate the capital accounts of the members, nor is such a determination
necessary to this decision."
Appellants claim that without information about respective capital
interests, it was impossible for the arbitrator to evaluate the effectiveness of the
heirs' vote to make themselves co-managers and their vote to remove Wages.
They rely on section 6.4 of the Ryan &Wages agreement which states:
At a meeting called expressly for that purpose, any Manager may
be removed at any time, with or without cause, by the affirmative
vote of Members holding at least two-thirds of all Interests in the
Company's capital.
The arbitrator necessarily considered, and rejected, the heirs' arguments
that they were co-managers of Ryan &Wages at the time the first amendment
was signed, that determining capital interests was necessary to the decision, and
that they had removed Wages as manager in 2008. This is demonstrated by the
arbitrator's finding that there is a conflict between the requirements for removal
12
No. 68946-1-1/13
as set out in article 6.2(c)(a) and 6.4, and article 6.2(c)(a) controls because it is
more specific. Under article 6.2(c)(a), removal takes an affirmative vote of
members owning 60 percent of profit interests and members owning 60 percent
of capital interests. The membership interests of the heirs, as found by the
arbitrator, totaled only 49 percent. Thus, even without information about the
extent of their capital interests, the arbitrator had enough information to find
conclusively that the heirs lacked authority to remove Wages.
In summary, the trial court properly dismissed the appellants' suit on
summary judgment on the ground of collateral estoppel.
CMDG has filed a motion asking the court to take statements from the
heirs' briefs in the second lawsuit as an admission that he was the sole manager
in January 2010. Appellate courts may take additional evidence before deciding
a case on review if six elements are present. RAP 9.11. The first element
requires the additional information to be necessary to fairly resolve the case at
issue. RAP 9.11(a)(1). Because the additional information is not necessary to a
fair resolution of this appeal, we deny the motion.
LIABILITY FOR FEE AWARD
We next consider CMDG's claim that the heirs should have been made
personally responsible for the award of attorney fees. The Redding Lake
Stevens agreement has a prevailing party attorney fees clause:
13
No. 68946-1-1/14
13.4. ATTORNEYS' FEES. If any legal proceeding is
commenced to enforce or interpret any provision of this Agreement,
the prevailing party shall be entitled to recover reasonable
attorneys' fees at trial and on any appeal (including but not limited
to expert witness fees, transcript costs and other similar expenses),
in addition to the costs and disbursements allowed by law.
Having prevailed on summary judgment, CMDG moved for an award of attorney
fees and costs. The trial court determined that CMDG was the prevailing party
as to both claims in the complaint, and the reasonable attorney fees incurred by
CMDG were in the total amount of $56,734. The court entered findings of fact
and conclusions of law in support of this award.
CMDG contends that the court erred in refusing to impose liability for the
fees upon the heirs personally as well as upon Ryan & Wages. Whether the
heirs should be made liable for the award of fees was thoroughly briefed and
argued in the trial court. The key findings related to this issue are as follows:
2. The contract that was the basis for plaintiffs' breach of
contract claim, the Redding Lake Stevens, LLC Operating
Agreement ("Redding OA"), contains a bilateral prevailing party
attorney fee provision in Section 13.4.
3. CMDG, as the prevailing party that defeated a breach of
contract claim, is entitled to recover its reasonable attorney fees
and costs.
8. The assertion that Mr. Wages was not the manager of
Ryan & Wages when he signed the First Amendment to the
Redding Lake Stevens, LLC Operating Agreement ("First
Amendment") was central to both the contract claim and the
tortious interference claim asserted by plaintiffs.
9. Plaintiffs' tortious interference claim arose out of the
claimed breach of the Redding OA, and the breach of the Redding
OA was central to that dispute.
10. CMDG is entitled to reasonable attorney fees and costs
for defending that claim under RCW 4.84.330, and for defending
the breach of contract claim.
14
No. 68946-1-1/15
11. The fees incurred by CMDG would not have been any
different if only the breach of contract claim had been asserted....
Based on the above findings, the Court enters the following
CONCLUSIONS OF LAW:
1. Ryan and Wages, LLC is liable for CMDG's attorney fees
and costs awarded under this Order.
In Washington, attorney fees may be awarded when authorized by private
agreement. Tradewell Group, Inc. v. Mavis, 71 Wash. App. 120, 126, 857 P.2d
1053 (1993). Whether a specific contractual provision authorizes an award of
fees is a question of law reviewed de novo. Tradewell, 71 Wash. App. at 126.
Because the attorney fee provision in the Redding Lake Stevens
agreement is bilateral, rather than unilateral, it is the equitable principle of
mutuality of remedies which applies in this case rather than the statutory
language of RCW 4.84.330. Kaintzv.PLG, Inc., 147 Wash. App. 782, 197 P.3d
710 (2008). Whether the analysis is based on the statute or equity, the issue is
the same: whether a dispute is sufficiently related to the contract so as to justify
an award of attorney fees to the prevailing party under a prevailing party attorney
fee provision. "The general rule is that contractual attorney fees are warranted
when the claims asserted are 'on a contract.' An action is 'on a contract' if the
action arose out of a contract and if the contract is central to the dispute." 25
David K. Dewolf, Keller W. Allen, & Darlene Barrier Caruso, Washington
Practice: Contract Law & Practice § 14.18, at 357-58 (2d ed. 2007) (footnote
omitted); see, e.g., Tradewell, 71 Wash. App. at 130.
In support of the assertion that the heirs should be jointly and severally
liable for the fee award along with Ryan & Wages, CMDG first argues that the
15
No. 68946-1-1/16
heirs joined Ryan & Wages in asserting the breach of contract claim. Citing the
equitable principle of mutuality of remedy, CMDG argues that when the heirs
"elected to assert breach of contract claims against CMDG," they also elected to
be liable for CMDG's attorney fees when their claims were defeated. Cross-
Appellant Br. at 38, citing Kaintz, 147 Wash. App. at 789.
The trial court, however, reviewed the wording of the allegations in the
complaint and determined that the heirs did not elect to assert the breach of
contract claim.
The complaint lists three plaintiffs in the caption—Ryan & Wages and both
heirs. The caption refers to all three entities in the singular as "Plaintiff."
In articulating the breach of contract claim, the complaint alleges that
CMDG knew or should have known that Wages was not the manager of Ryan &
Wages and could not sign on its behalf, and that CMDG breached the Redding
Lake Stevens agreement when it "recognized the purported Amendment as
valid." Compl. fflj 4.4, 4.5. The complaint then states, "As a result, Plaintiff has
suffered pecuniary losses." Compl. TJ 4.6.
Next, in articulating the claim for tortious interference with a contractual
relationship, the complaint alleges a contractual relationship between the heirs
and Thomas Wages through the Ryan &Wages agreement. The complaint
alleges that CMDG knew of this contractual relationship and interfered with it by
treating Wages as if he were the speaking agent for Ryan &Wages despite
knowing that he was no longer a manager, and CMDG thereby disrupted the
Ryan &Wages agreement. Compl. ffl| 4.7-.10. The complaint then alleges that
16
No. 68946-1-1/17
the two individual heirs suffered damages as a direct result of CMDG's actions.
Compl. H4.11.
The trial court recognized that the complaint was not entirely clear as to
whether the heirs as individuals were alleging that CMDG breached the Redding
Lake Stevens agreement, but drew the inference that they were not. "There is no
breach of contract claim on the Lake Stevens agreement as to those two
individuals." Having reviewed the complaint in context, we agree with the trial
court's interpretation that the tortious interference claim was the only claim
brought on behalf of the heirs personally.
"The court may award attorney fees for claims other than breach of
contract when the contract is central to the existence of the claims, i.e., when the
dispute actually arose from the agreements." Deep Water Brewing, LLC v.
Fairway Res., Ltd., 152 Wash. App. 229, 278, 215 P.3d 990 (2009), review denied,
168 Wash. 2d 1024 (2010). CMDG claims that the Redding Lake Stevens
agreement was central to the heirs' tortious interference claim.
CMDG relies in part on the trial court's finding of fact 9, stating that the
tortious interference claim "arose out of the claimed breach of the Redding OA,
and the breach of the Redding OA was central to that dispute." Finding of fact 9
is something of an anomaly, for two reasons. First, if intended as a
determination supporting CMDG's request to make the heirs personally liable for
the award of attorney fees, it is inconsistent with the court's ultimate decision to
deny that request. Second, if intended to reflect the standard articulated in Deep
Water Brewing and its antecedents for awarding contractual attorney fees on a
17
No. 68946-1-1/18
noncontract claim, it does not exactly mirror that standard. To say the tortious
interference claim "arose out of the claimed breach" of the Redding Lake Stevens
agreement is not the same as saying that the tortious interference claim "arose
out of the Redding Lake Stevens agreement. It is unclear, on review, exactly
what the trial court meant to resolve by entering finding of fact 8.
Although designated as a finding of fact, finding 8 is more properly
characterized as a conclusion of law, and we review it as such. See Scott's
Excavating Vancouver, LLC v. Winlock Props., LLC, Wn. App. , 308 P.3d
791, 795 (2013), citing Willener v. Sweeting, 107 Wash. 2d 388, 394, 730 P.2d 45
(1986). A trial court's conclusions of law are reviewed de novo. Sunnvside
Valley Irrigation Dist. v. Dickie. 149 Wash. 2d 873, 879, 73 P.3d 369 (2003).
The heirs acknowledge that the Redding Lake Stevens agreement would
have helped to establish the monetary value of their tortious interference claim
had they prevailed on it. The existence of the Redding Lake Stevens agreement
explains why CMDG was asking Wages to sign documents. In this respect,
however, the role of the Redding Lake Stevens agreement was merely to provide
"background." See Hemenwav v. Miller, 116 Wash. 2d 725, 743, 807 P.2d 863
(1991); Burns v. McClinton, 135 Wash. App. 285, 310, 143 P.3d 630 (2006), review
denied, 161 Wash. 2d 1005 (2007). It does not establish that the Redding Lake
Stevens agreement was central to proving the tortious interference claim.
To be successful on their claim of tortious interference, the heirs needed
to prove certain elements related to the Ryan & Wages agreement: (1) the Ryan
&Wages agreement was valid, (2) CMDG knew of the Ryan &Wages
18
No. 68946-1-1/19
agreement, (3) by allowing Wages to sign documents on behalf of Ryan &
Wages, they caused Wages to breach the Ryan & Wages agreement, (4) CMDG
acted improperly in doing so, and (5) the heirs suffered damage. See Evergreen
Monevsource Mortg. Co. v. Shannon, 167 Wash. App. 242, 258, 274 P.2d 375
(2012). The terms of the Redding Lake Stevens agreement are neither material
nor central to any of these elements.
CMDG argues that the tortious interference claim was "inseparable" from
the breach of contract claim as illustrated by Deep Water Brewing. Cross-
Appellant Br. at 43. There, the owner of a restaurant brought suit to enforce
provisions in easement and right-of-way agreements that protected his view, and
prevailed against homeowners interested in exceeding the height restrictions.
The owner was not a party to the original agreements. The trial court awarded
the owner attorney fees under prevailing party fee provisions in those
agreements, on the theory that the owner was a third party beneficiary of the
agreements. The Court of Appeals ruled that the owner was not a third party
beneficiary, but nonetheless could enforce the agreements as running covenants
protecting the view from the restaurant. Deep Water Brewing, 152 Wash. App. at
278-79. The court stated that "enforcement of the agreements and the claims
that followed their breach is the essence" of the owner's claim of tortious
interference by the homeowners. Deep Water Brewing, 152 Wash. App. at 279.
This case is not like Deep Water Brewing. It is too much of a stretch to
characterize the heirs' claim of tortious interference as an effort to enforce the
Redding Lake Stevens agreement. It is true that a single fact, conclusively
19
No. 68946-1-1/20
established in prior litigation, required dismissal of both the tortious interference
claim and the breach of contract claim: Wages was not the manager of Ryan &
Wages when he signed the first amendment to the Redding Lake Stevens
agreement. But that finding did not depend on the terms of the Redding Lake
Stevens agreement; rather, it arose out of the Ryan &Wages agreement and the
history of disputes among the members of Ryan &Wages.
Another case CMDG cites for support is Edmonds v. John L. Scott Real
Estate, Inc., 87 Wash. App. 834, 855-56, 942 P.2d 1072 (1997), review denied, 134
Wash. 2d 1027 (1998). In that case, a realtor unlawfully failed to return an earnest
money deposit. The prospective buyer prevailed on theories of breach of
contract, negligence, breach of fiduciary duty, and consumer protection violation.
The buyer-broker agreement and the earnest money agreement had provisions
for attorney fees. The trial court awarded attorney fees for claims, notjust for the
breach of the agreements. The decision to award attorney fees for the tort as
well as the contract claims was affirmed on appeal because the terms of the
underlying agreements defined the duties on which the claims for breach of
fiduciary duty and negligence were based:
Scott disputes the court's award of attorney fees to Edmonds
to the extent fees were awarded in connection with her breach of
fiduciary duty and negligence claims. It argues that these claims
are tort claims, not contract claims, and therefore cannot be
encompassed within an award of fees under either the buyer/broker
agreement or the earnest money agreement.
If Edmonds' breach of fiduciary duty and negligence claims
were actions "on a contract" then the award of fees was proper.
"[A]n action is on a contract for purposes of a contractual attorney
fees provision if the action arose out of the contract and if the
contract is central to the dispute." Tradewell Group. Inc. v. Mavis,
71 Wash. App. 120, 130, 857 P.2d 1053 (1993). The negligence
20
No. 68946-1-1/21
claims were based on Tjoa's drafting of the earnest money
agreement and his breach of duty to act with due diligence in
negotiating the purchase of the property on terms and conditions
acceptable to Edmonds. This duty was created under, and defined
by, the buyer/broker agreement. The breach of fiduciary duty
claims were based on Scott's disbursement of Edmonds' earnest
money in a manner it claims was set forth in the earnest money
agreement. Therefore, the terms of the earnest money agreement
and the contractual relationship created by the agreement are
central to these claims, rendering them claims "on a contract." It
was proper for the court to award fees in connection with these
claims under the contractual attorney fees provisions.
Edmonds, 87 Wash. App. at 855-56 (alteration in original); see also Western Stud
Welding, Inc. v. Omark Indus., Inc., 43 Wash. App. 293, 299, 716 P.2d 959 (1986)
(attorney fees properly awarded to prevailing defendant against plaintiff who
sued for breach of contract and, in the same lawsuit, alleged that the defendant
had tortiously interfered with the same contract).
This case is unlike Edmonds and Western Stud Welding, Inc. The terms
of the Redding Lake Stevens agreement did not define or prove the heirs' claim
that CMDG tortiously interfered with the Ryan &Wages agreement.
We conclude the tortious interference claim brought by the heirs did not
depend in any substantial way upon the existence or terms of the Redding Lake
Stevens agreement. We therefore vacate and disregard the trial court's
conclusion that the tortious interference claim arose out of the claimed breach of
the Redding Lake Stevens agreement and the breach was central to that dispute.
The trial court properly denied CMDG's request to make the heirs jointly and
severally liable for the award of attorney fees.
21
No. 68946-1-1/22
Affirmed.
WE CONCUR:
\h^ifl.cy
22