FPA Crescent Associates, LLC v. Jamie's LLC ( 2017 )

FILED
August 15, 2017
In the Office of the Clerk of Court
WA State Court of Appeals, Division Ill
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION THREE
FPA CRESCENT AS SOCIATES, LLC, a )
Delaware limited liability company, ) No. 34714-1-111
)
Respondent, )
)
V. ) UNPUBLISHED OPINION
)
JAMIE'S LLC, PENDLETON )
ENTERPRISES, LLC, a Washington )
limited liability company, d/b/a The )
Daiquiri Factory Spokane; and JAMIE )
PENDLETON, an individual, )
)
Appellants. )
SIDDOWAY, J. - This is the third time that the landlord-tenant dispute between
these parties has been before this court. The background details of what began as an
unlawful detainer proceeding are set forth in the decision in the tenants' initial, successful
appeal. See FPA Crescent Associates, LLC v. Jamie's LLC, 190 Wash. App. 666, 677, 360
P.3d 934 (2015) (FPA 1) 1.
In this appeal, the tenants and their guarantor argue that following remand, the
trial court (1) erred in offsetting the landlord's contract damages against the tenants'
1
We will hereafter refer to cause number 32705-1-111 as FPA I, and cause number
34335-9-111 as FPA II.
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award of attorney fees and costs and (2) violated the appearance of fairness doctrine. We
agree that the trial court erred in awarding and offsetting contract damages without a trial;
once again, we reverse the contract damages and fee award to the landlord. While we
find no violation of the appearance of fairness doctrine, we do find it necessary to remand
the tenants' attorney fee award to the trial court for reconsideration. We make no
attorney fee award on appeal. We remand for proceedings consistent with this opinion.
PROCEDURAL BACKGROUND
FPA Crescent Associates, LLC (FPA), formerly leased commercial space in
downtown Spokane to Jamie's, LLC and Pendleton Enterprises, LLC. The lease was
guaranteed by Jamie Pendleton. On May 28, 2014, FPA filed a "Verified Complaint for
Unlawful Detainer" against the two tenants and Mr. Pendleton (hereafter, collectively
"Pendleton") alleging nonpayment of rent and breach of lease covenants "as a cause of
action for unlawful detainer." FPA I, Clerk's Papers (CP) at 12. The complaint set forth
four "cause[ s] of action," in the following order: "Action for Issuance of Writ of
Restitution," "Breach of Lease" (alleging unpaid rent), "Breach of Lease - Illegal
Actions" (alleging other breaches of the parties' lease), and, "Breach of Guaranty and
Contract." Id. at 16-18. The trial court ordered issuance of a writ of restitution to the
Spokane County Sheriff two weeks later, on June 11, 2014.
Later in the month of June, FP A moved for and was granted partial summary
judgment on its second and fourth causes of action alleging failure to pay rent owed
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under the lease and a breach of Mr. Pendleton's personal guaranty. Judgment was
entered in FPA's favor for $21,245.61, consisting of (1) $2,229.61 in unpaid "[a]dditional
[r]ent," and (2) $19,061.00 in rent for the initial four months of the lease. Id. at 218-19,
282. The initial four months' rent had been abated, but abatement was forfeited under the
lease if Pendleton committed a default that it failed to cure. The judgment entered bore
interest at the 18 percent contract rate. The court also awarded FPA $49,870.50 in
attorney fees and costs.
FP A had not provided Pendleton with notice and an opportunity to cure before
commencing its unlawful detainer action, which is required by RCW 59.12.030(3) when
unlawful detainer is based on nonpayment of rent. The trial court was persuaded by FPA
that it was entitled to proceed based on Pendleton's status us a holdover tenant under
RCW 59 .12.030( 1). An unlawful detainer action lies against a holdover tenant without
providing notice and an opportunity to cure. Although the 90-month term of Pendleton's
lease had not expired, FPA argued successfully in the trial court that it had the right under
its lease to terminate Pendleton's lease for a default in payment of rent without notice; it
had done so; and Pendleton was a holdover tenant by virtue of that early termination.
In this court's published opinion in FPA I, we held that unlawful detainer against a
holdover tenant under RCW 59 .12.030(1) "is applicable only after the expiration of the
fixed term as specified in the lease agreement." FPA I, 190 Wash. App. at 677.
Concluding that FPA did not give proper notice under RCW 59.12.030(3), this court
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"reverse[d] the trial court's grant of summary judgment to FPA, h[e]ld that Pendleton
was not guilty of unlawful detainer, and dismiss[ed] FPA's unlawful detainer action
against Pendleton." FPA I at 678-79. Addressing Pendleton's request to direct the
superior court to order relief pursuant to RCW 59.12.090, 2 this court instead "remand[ed]
to the trial court for it to consider this issue after proper briefing and argument." FPA I at
679.
After remand, Pendleton moved the trial court for an award of attorney fees and
costs as the prevailing party. In response, FPA argued that not all claims had been
dismissed. The trial court directed the parties to brief "whether counts 2-4 in the
complaint remain viable." CP at 60. Following review of the briefing, the trial court
concluded that this court dismissed only the "first cause of action, entitled, 'Action for
Issuance of Writ of Restitution,"' and that "[ s]ummary judgment on counts 2 and 4 was
reversed." CP at 251 ( emphasis added). It ruled that a judgment in favor of Pendleton on
the "unlawful detainer cause of action" would be entered upon the resolution of all claims
and that "[c]ounts 2-4 will be set on the court's calendar for trial." CP at 252.
Pendleton attempted to appeal the trial court's order, contending it had ignored
this court's decision. When our clerk set the matter for a decision on whether the order
2
RCW 59.12.090 requires a plaintiff to post a surety bond "conditioned that the
plaintiff will prosecute his or her action without delay, and will pay all costs that may be
adjudged to the defendant, and all damages which he or she may sustain by reason of the
writ of restitution having been issued, should the same be wrongfully sued out."
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was appealable, both parties responded with briefing. FPA argued that dismissal of the
contract claims "would be giving Pendleton free rent just because FPA failed to give him
the 3-day notice." FPA II, Resp't FPA Crescent's Mem. Regarding Appealability at 4.
Instead, FPA argued,
By reversing the summary judgment, this Court allowed the contract claims
to have their deserved day in court where FP A can present evidence of the
obligation to pay and the failure to pay, and can seek damages.
Id. at 7-8.
A commissioner of this court decided the appealability issue. She recited the facts
that the trial court had awarded Pendleton attorney fees and had "set counts 2-4 of FPA's
complaint on its calendar for trial." FPA II, Comm'r Ruling at 2 (May 20, 2016)
(emphasis added). Concluding that what the parties really needed was a clarification of
whether this court's opinion disposed of all of FPA's causes of action or only the writ of
restitution, she referred the matter to the panel. Id.
In an Order Granting Discretionary Review in Part and Clarifying Opinion Filed
October 20, 2015, the panel stated:
The October 20, 2015 opinion of this court filed in COA No. 32705-
1-111:
( 1) Held that the trial court erred in granting FP A ... possession of
the subject premises;
(2) Reversed the trial court's grant of summary judgment to FPA;
and
(3) Remanded to the trial court the issue of Pendleton's costs,
attorney fees, and damages as a result of the wrongful issuance of the writ
of r:estitution.
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In reversing the trial court's grant ofsummary judgment, we
intended the trial court to have the ability to offset Pendleton's damages
from FPA's contract damages. We did not intend to reopen the issue of
how the trial court calculated FP A's contract damages. That issue was not
appealed.
CP at 271-72 (emphasis added). Neither party sought reconsideration or review of the
clarifying opinion, which became final on June 27, 2016.
A couple of weeks later, a status conference took place in the trial court. At that
time, and notwithstanding that the clarifying order repeated the ruling in the opinion of
this court that the trial court's grant of summary judgment to FP A was reversed, the trial
court treated its order granting partial summary judgment as a binding determination of
the contract issues. See Report of Proceedings (RP) at 5 (characterizing the final
judgment earlier entered as "a starting point" in arriving at a final judgment). It asked the
parties to submit briefing addressing the damage and attorney fee figures needed to arrive
at a final judgment.
Even though FPA had reported to this court two months earlier that it was merely
looking for its "deserved day in court where FPA can present evidence of the obligation
to pay and the failure to pay, and can seek damages," 3 it now proposed to the trial court
that after determining the attorney fees and costs to which Pendleton was entitled, it:
3
FPA II, Resp't FPA Crescent's Mem. Regarding Appealability at 8.
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• Subtract from that the $21,245.61, plus interest, previously awarded
Plaintiffs on Counts 2 and 4 (breach of contract); interest on that
amount is $7,679.64; and,
• Subtract $19,144.50 in Plaintiffs attorneys' fees incurred on the
contract claims.
Under this approach, the court needs to determine the amount of fees
Defendants are entitled to on Count 1, subtract the $48,069.75 that Plaintiff
requests, and enter final judgment on a new amount.
CP at 345. It argued that Pendleton was not entitled to recover any time on the contract
claims "because [FPA] prevailed on those claims." CP at 346.
The trial court rejected Pendleton's protestations about the procedure being
followed and found that of 25 8 hours of attorney time claimed by Pendleton for success
on the unlawful detainer claim, 179 were reasonable, and that Pendleton's fee of $300 per
hour was also reasonable. The result was a total award of $53,700.
The trial court found that FPA's attorneys reasonably spent 54.3 hours toward a
successful outcome on its contract claim and that the attorney's rate of $335 per hour-
and later $365-was reasonable. The result was an award of fees on the contract claim of
$19,144.50. Adding to that the contract damages it had awarded in its (reversed)
summary judgment decision and $7,670.64 in interest calculated at the 18 percent
contract rate, it awarded FPA a total of$48,081.70. Offsetting the two awards left a net
award to Pendleton of only $5,618.30.
Following entry of the trial court's final judgment, Pendleton appeals.
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ANALYSIS
The unlawful detainer action in chapter 59.12 RCW provides an expedited
method for resolving the right to possession and hastening the recovery of
real property. MacRae v. Way, 64 Wash. 2d 544, 546, 392 P.2d 827 (1964).
"In such proceedings the superior court sits as a special statutory tribunal,
limited to deciding the primary issue of right to possession together with
the statutorily designated incidents thereto, i.e., restitution and rent or
damages." Id. The primary issue to be resolved in an unlawful detainer
action is the right to possession. Port of Longview v. Int 'l Raw Materials,
Ltd., 96 Wash. App. 431, 436, 979 P.2d 917 (1999).
FPA I, 190 Wash. App. at 674-75. RCW 59.12.170 authorizes the court in a proceeding for
an unlawful detainer after default in the payment of rent to "find the amount of any rent
due" and enter a judgment thereon, as the trial court did here before the first appeal.
Failure to follow the unlawful detainer statute defeats the court's jurisdiction.
Kessler v. Nielsen, 3 Wash. App. 120, 123, 472 P.2d 616 (1970) (citing Sowers v. Lewis, 49
Wn.2d 891,307 P.2d 1064 (1957)). Any orders, rulings, or factual determinations made
must be vacated. Angelo Prop. Co., LP v. Hafiz, 167 Wn. App. 789,822,274 P.3d 1075
(2012). Hence in FPA I, because FPA had not complied with statutory notice
requirements, we dismissed the unlawful detainer action and reversed the partial
summary judgment. "Rent or damages may only be recovered under the statute when
there is a right to possession. When this right is not present, the damages or rent must be
recovered in an ordinary civil action." Kessler, 3 Wash. App. at 123-24 (citing Stevens v.
Jones, 40 Wash. 484, 82 P. 754 (1905)).
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Once the question of right to possession has resolved itself, a trial court may
convert an unlawful detainer action into an ordinary civil suit for damages. Munden v.
Hazelrigg, 105 Wash. 2d 39, 45-46, 711 P.2d 295 (1985). In so holding in Munden, our
Supreme Court overruled prior case law, recognizing that permitting conversion of the
case after its unlawful detainer purpose was concluded is in the interests of judicial
economy and will spare parties the expense and inconvenience of maintaining two suits.
Id. at 46-4 7.
At the time Pendleton attempted to file its second appeal, it provided us with a
copy of the trial court's order of March 28, 2016, which included a finding that
"[p]ossession of the premises is no longer an issue" and a conclusion of law that
"[b]ecause possession of.the premises is no longer at issue, this matter may be converted
to a civil action addressing the remainder of the claims." CP at 251-52. Both the trial
court, in its order, and FPA, in its submission on appealability, represented to this court
that the contract claims were being set for a future trial in the converted civil action for
damages. The apparent issue in seeking clarification was whether this court had
dismissed the action in its entirety, or left open the trial court's ability to convert it and
try the contract claims. This court relied on those representations in stating in its
clarification order that the trial court would be able to offset Pendleton's damages against
FPA's contract damages.
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The trial court had no basis for awarding FP A contract damages and attorney fees
in its August 18, 2016 order and judgment because the contract claims have never been
tried. Before the first appeal, Pendleton resisted FPA's motion for partial summary
judgment on the legally correct basis that the trial court lacked jurisdiction, not on the
merits of the amount of rent that was owed.
The statement in our clarifying order that the issue of the amount of contract
damages was not appealed was a correct statement. Where Pendleton was challenging
the court's jurisdiction to entertain the action on account of defective notice it could, but
was not required to, raise a dispute as to the amount FP A claims is owed. It chose not to.
This court's statement in the clarifying order that "[w ]e did not intend to reopen the issue
of how the trial court calculated FPA's contract damages" unfortunately led FPA and the
trial court to believe, in error, that the summary judgment rulings we reversed somehow
remained binding. CP at 271-72. Had we so held, it would have been error. Pendleton
had never had its day in court on the amount of rent owed or guaranteed.
We reverse the Final Judgment and Findings of Fact, Conclusions of Law and
Order dated August 18, 2016, and direct the trial court to enter a revised judgment in the
amount of the attorney fees and costs to which Pendleton is entitled. We direct the trial
court to reconsider Pendleton's entitlement to attorney fees and costs, since the trial court
discounted Pendleton's award, stating:
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At a minimum, one third of Pendleton's arguments in research, briefs, and
argument addressed the proposition that no other claims could be heard
under an "unlawful detainer" caption. That argument was rejected by the
appellate court in its May 27, 2016, clarifying order acknowledging
contract damages.
CP at 360. This court did not reject that argument. Pendleton correctly contended that
FPA's second and fourth causes of action-what FP A characterizes as its contract
claims-could not be heard in the unlawful detainer action until the right to possession
was resolved and the trial court converted the action into an ordinary civil suit for
damages.
We reject Pendleton's contention that the trial court violated the appearance of
fairness doctrine by subjecting its claims for attorney fees to a different level of scrutiny
than the trial court applied to FPA's claim for attorney fees. Bias inferred by Pendleton
was attributable to a misperception by the court that FP A, not Pendleton, had been correct
about the jurisdictional issue that appears to have accounted for most of the fees and costs
incurred up to the time of the fee award. Having corrected that misperception, we rely on
the trial court to reconsider Pendleton's fee award.
We decline to award attorney fees and costs to either side on appeal, recognizing
that this court's clarifying order in the prior appeal created confusion. 4
4
We point out that Judge Rebecca Pennell was not on the panel that decided the
prior appeal and did not sign the clarifying order.
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We reverse the Final Judgment and Findings of Fact, Conclusions of Law and
Order dated August 18, 2016. We direct the trial court to reconsider its award of attorney
fees and costs to Pendleton and to enter a revised judgment in the amount of the attorney
fees and costs to which it is entitled. We remand the now-converted civil action for trial.
A majority of the panel has determined this opinion will not be printed in the
Washington Appellate Reports, but it will be filed for public record pursuant to RCW
2.06.040.
d'ltlbw~
doway, J.
1
J: ·
WE CONCUR:
j
Pennell, J.
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