IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
SHAMIM MOHANDESSI; JOSEPH, ) No. 77017-9-I consolidated with
GRACE, individually as residential ) No. 77581-2-I
owners and derivatively on behalf of )
2200 RESIDENTIAL ASSOCIATION, )
a Washington non-profit corporation, )
and derivatively on behalf of 2200 ) DIVISION ONE
CONDOMINIUM ASSOCIATION, a )
Washington non-profit corporation, )
)
Appellants, )
)
v. )
)
URBAN VENTURE LLC, a Washington ) ORDER GRANTING MOTIONS FOR
limited liability company; VULCAN, INC.,) RECONSIDERATION AND
a Washington corporation; 2200 ) WITHDRAWING OPINION AND
CONDOMINIUM ASSOCIATION, a ) SUBSTITUTING NEW OPINION
Washington non-profit corporation; )
2200 RESIDENTIAL ASSOCIATION, a )
Washington non-profit corporation; )
GARY ZAK, an individual, BRIAN )
CROWE, an individual; BRANDON )
MORGAN, an individual; and JOHN )
DOES 1-15, individuals or entities, )
)
Respondents. )
)
All parties filed motions for reconsideration of the opinion filed on March 9,
2020. 1 The parties then filed answers to the motions.
A majority of the panel has determined that respondents’ motions for
reconsideration should be granted in part, appellant’s motion for reconsideration should
1 Kerry S. Bucklin filed a motion to file an amicus brief in support of the respondents. The motion
is denied and the proposed brief was not considered.
No. 77017-9-I/2
No. 77581-2-I
be denied, and the opinion filed on March 9, 2020 withdrawn. A new opinion will be
filed.
Now, therefore, it is hereby
ORDERED that respondents’ motions for reconsideration are granted in part,
appellant’s motion for reconsideration is denied, and the opinion filed on March 9, 2020
shall be withdrawn. A new opinion will be filed.
FOR THE PANEL:
_____________________________
2
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
SHAMIM MOHANDESSI; JOSEPH, ) No. 77017-9-I consolidated with
GRACE, individually as residential ) No. 77581-2-I
owners and derivatively on behalf of )
2200 RESIDENTIAL ASSOCIATION, )
a Washington non-profit corporation, )
and derivatively on behalf of 2200 ) DIVISION ONE
CONDOMINIUM ASSOCIATION, a )
Washington non-profit corporation, )
)
Appellants, )
)
v. )
)
URBAN VENTURE LLC, a Washington )
limited liability company; VULCAN, INC.,)
a Washington corporation; 2200 )
CONDOMINIUM ASSOCIATION, a )
Washington non-profit corporation; )
2200 RESIDENTIAL ASSOCIATION, a )
Washington non-profit corporation; )
GARY ZAK, an individual, BRIAN )
CROWE, an individual; BRANDON )
MORGAN, an individual; and JOHN )
DOES 1-15, individuals or entities, ) PUBLISHED OPINION
)
Respondents. )
)
MANN, C.J. — This case concerns condominium assessments. Shamim
Mohandessi and Joseph Grace (collectively plaintiffs) appeal the trial court’s dismissal
No. 77017-9-I/2
of their claims against the 2200 Residential Association (RA), the 2200 Condominium
Association, Gary Zak, Brian Crowe, and Brandon Morgan (collectively MA), Urban
Venture LLC, and Vulcan, Inc., (all collectively defendants). The plaintiffs brought direct
and derivative claims alleging that the defendants violated the Washington
Condominium Act (Condominium Act), chapter 64.34 RCW, the Washington Consumer
Protection Act (CPA), chapter 19.86 RCW, breached statutory and fiduciary duties, and
tortiously interfered with the MA Board’s duties.
The plaintiffs contend that the trial court erred in (1) concluding that the statute of
limitations barred their claims, (2) concluding that they could not bring claims
derivatively on behalf of the RA and MA, (3) concluding that they lacked standing to
bring claims against the MA for violations of the Condominium Act, (4) dismissing their
breach of contract claims against the RA, (5) sua sponte dismissing their claim that a
prior 2012 settlement agreement was void as the product of fraud and collusion, and (6)
awarding fees under the 2012 settlement agreement and costs under the Uniform
Declaratory Judgment Act, RCW 7.24.100. The defendants cross appeal and argue
that the trial court erred: (1) in concluding that the common expense liability allocation in
the master declaration violates the Condominium Act, RCW 64.34.224(1), and (2) in not
awarding their full attorney fees under the 2012 settlement agreement, or alternatively,
under the Condominium Act.
We affirm.
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I.
A. 2200 Westlake
This appeal concerns a mixed-use development located at 2200 Westlake
Avenue in downtown Seattle (2200 Westlake) comprising over 500,000 gross square
feet, excluding underground parking. Milliken Urban Limited Partnership (Milliken)
began the development of 2200 Westlake. Urban Venture LLC, a subsidiary of Vulcan
Inc., invested in the project and developed it jointly with Milliken. Urban Venture bought
out Milliken’s interest midway through construction in 2005.
The development was completed in 2006. That same year Urban Venture
executed and recorded a “master declaration” under the Condominium Act, creating a
four-unit condominium called “2200, a condominium.” The four units include: (1) the
commercial unit, which leases 90,000 square feet of commercial retail shops; (2) the
hotel unit, housing the 153-room Pan Pacific Hotel; (3) the food unit, leased to Whole
Foods grocery store; and (4) the residential unit, comprised of 259 residential units,
which has a separate sub-condominium association.
2200 Westlake is governed by, and acts through, the 2200 Condominium
Association, a nonprofit corporation, which the parties refer to as the Master Association
(MA).1 The owner of each unit of 2200 Westlake is a member of the MA. The MA is
administered by a four-person board, with each owner electing one representative to
hold the single vote allocated to each owner.
In 2006, Urban Venture also recorded a separate declaration for the 259-unit
residential unit of 2200 Westlake. The “residential declaration” covers the 2200
1
The parties do not dispute that the 2200 Condominium Association is not actually a “master
association” as that term is defined in the Condominium Act, RCW 64.34.020(28), .276.
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No. 77017-9-I/4
Residential Association (RA). The RA is also organized as a nonprofit corporation. The
RA board is elected by a majority of the residential unit owners. The RA board chooses
a single member to represent it on the MA Board.
Urban Venture owned the commercial, hotel, and food store units from
completion of the project, until selling the units to third parties: the commercial unit in
March 2016, the food store unit in September 2016, and the hotel unit in February 2017.
During Urban Venture’s ownership, the MA board members were Vulcan employees,
appointed by Urban Venture. The initial board members were Gary Zak, Hamilton
Hazlehurst, and Brian Crowe.
B. Common Expense Liability
Central to this litigation is the common expenses associated with the common
elements of 2200 Westlake and the division of the common expenses between the four
condominium units in the MA. The master declaration defines the “Common Elements”
as “all portions of the Property and the Project which are outside the boundaries of a
Unit, and improvements within the boundaries of a Unit which are designated as
Common Elements or Limited Common Elements under the provisions of Article 3.”
“Common Expenses” are defined as:
expenditures made by, or financial liabilities of the Association, together
with any allocations to reserves. Common Expenses are funded by each
Owner in accordance with its Allocated Interest, except that certain
Common Expenses are specifically allocated to fewer than all Units or are
specially allocated among Units based on usage or benefit, as more
specifically set forth in Section 10.4.
The common expense liability, and interest in the common elements, are
determined by the units’ declared value, which results in the “Allocated Interest
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No. 77017-9-I/5
Percentage.” Exhibit B to the MA declaration shows the unit data and allocated
interests for each unit.
Unit Floor Parking
Unit Name Declared Value CEL/ICE Votes
Area (Sq. Ft.) Spaces
Unit C 24,352 $11,340,000 6.3 1 90 covered
(Commercial 36 uncovered
Unit)
Unit R 259,447 $138,960,000 77.2 1 318 covered
(Residential Unit)
Unit H (Hotel 120,309 $18,000,000 10.0 1 55 covered
Unit) 2 uncovered
Unit F (Food 43,616 $11,700,000 6.5 1 272 covered
Store Unit) 12 uncovered
Total $180,000,000 100% 4
“Declared value” is defined as “the value of each Unit as stated in Schedule B,
which does not necessarily reflect market value and will not be affected by sales price.”
In contrast, the preamble to the MA declaration indicates that concerns about fair
governance for all units culminated in “the decision to allocate many of the costs by
square footage (for the sake of simplicity) or, if feasible, by separate metered usage.”
The common element liability, however, does not correspond to square footage. The
RA declaration includes Schedule B, which allocates Unit R’s common element liability
to each condominium unit based on “relative area of Units.”
The common expense liability allocation was set forth in the public offering
statement and governing documents were provided to every original buyer at 2200
Westlake before they bought their units. The public offering statement included a draft
budget for the MA and the RA. The MA declaration, including Exhibit B, were also
recorded.
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No. 77017-9-I/6
C. Prior Litigation
Plaintiff Grace bought a residential unit at 2200 Residential in 2006. Grace
considers himself an experienced real estate purchaser. Grace purchased a second
unit at 2200 Residential in 2015, after this litigation began. Plaintiff Mohandessi, an
attorney, purchased a residential unit at 2200 Residential in 2010.
Grace has been in conflict with the RA since April 2007. In protest to the RA
Board’s actions and assessments, Grace stopped paying his full dues in 2008. The RA
sued Grace in 2011 and 2013 to collect unpaid dues and late charges.2 Grace asserted
defenses and counterclaims, alleging that the RA breached its fiduciary duty, committed
fraud, trespass, and conversion, and held an invalid election. The trial court dismissed
Grace’s counterclaims and defenses, finding in favor of the RA.
From 2009 until 2012, the RA and MA pursued claims against Urban Venture
and Vulcan under the WCA and CPA for construction defects. In November 2012, the
RA, MA, Vulcan, and Urban Venture entered a settlement agreement. Urban Venture
agreed to pay the RA $26,000,000 in exchange for release of the RA’s claims against
Urban Venture. The RA received $3,120,000 to use as it deemed appropriate, with the
remaining $22,800,000 set aside for remediation. The validity and fairness of the
common expense liability and allocation in the master declaration were raised during
settlement discussions but did not become part of the 2012 settlement agreement.
D. Current Litigation
The plaintiffs filed this lawsuit against the various defendants in October 2015.
The original complaint sought declaratory judgment that the MA violated the
2
2200 Residential Association v. Grace, No. 72651-0 (Wash. Ct. App. July 25, 2016)
(unpublished).
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No. 77017-9-I/7
Condominium Act and the MA declaration by “improperly and disproportionately
shift[ing] costs of 2200 Westlake onto plaintiffs and other residential owners.” The
plaintiffs alleged that: (1) the MA and RA declarations were contracts, and that the MA
and RA breached those contracts and the implied covenant of good faith and fair
dealing, (2) the MA and RA boards breached their fiduciary duties, and (3) Urban
Venture breached its fiduciary duties, and tortuously interfered with the MA and RA’s
performance of their contractual obligations under their respective declarations. The
plaintiffs made the claims on behalf of themselves, as well as derivatively on behalf of
the RA and double derivatively on behalf of the MA.
The defendants moved for judgment on the pleadings under CR 12(c). On
February 12, 2016, the trial court dismissed the plaintiffs’ direct claims against the MA
for lack of standing, and the breach of contract claims against the RA under res
judicata, to the extent that the events occurred before December 2014 (the date of
Grace’s settlement in his prior litigation). The court also dismissed the breach of an
implied covenant of good faith and fair dealing, finding that there was no legal authority
for an implied covenant under a condominium declaration. The trial court limited the
plaintiffs’ remaining claims based on the statute of limitations, RCW 4.16.080, to the
extent they were based on events occurring more than three years before the plaintiffs
filed suit in October 2015.
The defendants then moved for summary judgment. On September 29, 2016,
the trial court granted in part and denied in part the defendants’ motions. The court
dismissed all claims asserted by the plaintiffs derivatively on behalf of the RA and MA.
No claims remained against Urban Venture and the MA after the September 29, 2019,
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No. 77017-9-I/8
order. During the summary judgment hearing, the trial court expressed “real concern”
that, although the issue of the statute of limitations was not before it, any claim
challenging the common expense liability allocation under the master declaration was
likely time-barred.
Nevertheless, in December 2016, the plaintiffs amended their complaint, adding
new claims challenging the common expense liability and adding Vulcan as a party.
The plaintiffs amended their claims against the RA to include a claim for breach of the
residential declaration arising from the RA’s entry into the November 2012 settlement
agreement. On December 20, 2016, the plaintiffs voluntarily dismissed their claims
against the RA.
The plaintiffs were granted leave to amend their complaint twice more, in March
2017 and May 2017. The plaintiffs’ new claims alleged that: (1) Urban Venture and the
MA violated the Condominium Act, (2) Urban Venture, Vulcan, and certain MA board
members, breached duties under the Condominium Act, (3) Urban Venture and Vulcan
aided and abetted the MA’s alleged breach of duties, (4) Urban Venture violated the
CPA, and (5) Vulcan tortuously interfered with the plaintiffs’ expectancy that the MA and
RA, and respective boards, would comply with all applicable laws and duties. The
plaintiffs also sought a declaratory judgment that the 2012 settlement agreement was
“void and unenforceable as collusive, fraudulent, and against public policy” (referred to
as the “twenty first claim”). The plaintiffs named the RA as a “nominal” defendant.
Prior to the plaintiffs’ third amended complaint, the defendants moved for
summary judgment dismissal of the plaintiffs’ remaining claims in March 2017. The
plaintiffs also moved for partial summary judgment.
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No. 77017-9-I/9
In May 2017, the trial court dismissed all remaining claims on summary judgment
including the plaintiffs’ newest claims added in their third amended complaint. The court
dismissed the twenty-first claim because “there [was] no evidence of fraud, collusion or
undue influence” to create an issue of fact regarding the settlement agreement’s
validity. 3 The trial court dismissed all other claims, finding the statute of limitations
barred the plaintiffs’ claims because all challenges related to the master declaration,
which was recorded in 2006.4
Because plaintiffs’ claims were dismissed with prejudice, the trial court concluded
that the defendants were prevailing parties. The defendants sought their attorney fees
as the prevailing party under the Condominium Act, the master declaration, and the
2012 settlement agreement. The defendants also sought their litigation costs under the
master declaration, the 2012 settlement agreement, and the Declaratory Judgment Act,
RCW 7.24.100. The trial court awarded limited fees under the 2012 settlement
agreement alone, and awarded costs under RCW 7.24.100.
The plaintiffs appealed and the defendants cross appealed.
II.
The plaintiffs contend that the trial court erred in its May 27, 2017, summary
judgment order by dismissing claims against the MA, Urban Ventures, and Vulcan
based on the statute of limitations. While the plaintiffs agree that the relevant statute of
3
Urban Venture and Vulcan, joined by the MA, argued that an alternative ground for dismissal
was that the plaintiffs’ claims were barred by the settlement agreement.
4
As part of its ruling, the trial court concluded that the common expense liability allocation in the
MA declaration “does not comply with RCW 64.34.224(1) because the [MA] Declaration did not state the
formula or method used to establish the allocation of common expenses due to the fact that the Declarant
did not use a formula or method to establish the allocation of common expenses.” The court rejected the
defendants’ argument that the table in exhibit B is the formula or method used to establish the percentage
allocation. Because the court dismissed the plaintiffs’ claims, we agree with the defendants that the
court’s conclusion was dicta. We will not address the merits of the court’s conclusion.
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No. 77017-9-I/10
limitations is three years under RCW 4.16.080(2), they argue that a new cause accrues
every year when the MA allocates the common expenses between the units, using the
declared value in exhibit B. We disagree.
We review summary judgment decisions de novo. Int’l Marine Underwriters v.
ABCD Marine, LLC, 179 Wn.2d 274, 281, 313 P.3d 395 (2013). “Summary judgment is
proper only where there is no genuine issue of material fact and the moving party is
entitled to judgment as a matter of law.” Int’l Marine Underwriters, 179 Wn.2d at 281;
CR56(c).
RCW 4.16.080(2) states that “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 not hereinafter enumerated” shall be commenced within
three years. The determination of whether the statute of limitations bars a plaintiff’s
claim depends on when the plaintiff’s cause of action accrued. Haslund v. City of
Seattle, 86 Wn.2d 607, 619, 547 P.2d 1221 (1976). The general rule is “that a cause of
action accrues and the statute of limitations begins to run when a party has the right to
apply to a court for relief.” Haslund, 86 Wn.2d at 619.
Each of the plaintiffs’ individual causes of action against the MA, Vulcan, and
Urban Ventures arises out its claim that the original master declaration, and specifically
the common element liability allocation, violate the Condominium Act, CPA, or a
statutory or common law duty.5 There is no genuine issue of fact, however, that the
5
These include the following cause of action: (1) violation of Condominium Act by Urban
Ventures, and the MA based on the common expense liability allocation, appointment of board members,
and design of condominium structure; (2) breach of duty against Vulcan, Urban Ventures, and the MA
arising from original condominium structure and common expense liability allocation; (3) aiding and
abetting breach of duty by Vulcan and Urban Ventures arising from original condominium structure and
common expense liability allocation; (5) breach of declaration against MA arising from common expense
liability allocation; (6) breach of CPA against Urban Ventures arising from common expense liability
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No. 77017-9-I/11
master declaration and common expense liability allocation in exhibit B, were created
and recorded in 2006. Nor is there a genuine issue of fact that the common expense
liability allocation was set forth in the public offering statement and governing
documents were provided to every original buyer at 2200 Westlake before they bought
their units. As such, any challenge to the common expense liability allocation accrued
at the time the residential units were sold in 2006.
The plaintiffs argue first, without citation to authority, that a new cause of action
should accrue each year that that the MA set the budget for the following year using the
common expense liability allocation. The plaintiffs ignore, however, that the MA has no
discretion or authority to deviate from the common expense liability allocation set forth
in the original master declaration and exhibit B. The master declaration provides that
“The Association, acting by and through the Board for the benefit of the Condominium
and the Owners, shall enforce the provisions of this Declaration and of the Bylaws and
shall have all powers provided in the Act[.]” The master declaration further provides that
the owners must “comply strictly with the provisions of this Declaration, the Bylaws and
the administrative rules and regulation passed hereunder[.]” Finally, the MA is required
by both the master declaration and the Condominium Act to apply the common expense
allocation in exhibit B. “[A]ll Common Expenses must be assessed against all the Units
in accordance with the respective Allocated Interest of each Unit as set forth in Exhibit
B.” See also RCW 64.34.360(2) (“all common expenses must be assessed against all
the units in accordance with the allocations set forth in the declaration pursuant to RCW
64.34.224(1)”).
allocation; and (7) tortious interference against Vulcan arising from the original master declaration and
common expense allocation.
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No. 77017-9-I/12
Plaintiffs assert that the MA amended the master declaration in 2010 to add
section 10.4.10, which gave the MA discretion over annual common expense
allocations. Section 10.4.10, however, applies only to limited common elements, not all
of the common elements. Section 10.4.10 provides that “Any Common Expense, or
portion thereof, benefitting fewer than all of the Units may be assessed by the Board
exclusively against the Units benefitted.” See also RCW 64.34.020 (“‘Limited common
element’ means a portion of the common elements allocated by the declaration or by
operation of RCW 64.34.204(2) or (4) for the exclusive use of one or more but fewer
than all of the units”). Common expenses, and limited common expenses are different
expenses, governed by different provisions of the master declaration, and subject to
differing statutory requirements. Thus, for example, while the MA has discretion under
Section 10.4.10 to approve a limited common expense that would benefit only the retail
unit and assess that limited common expense only against the retail unit, Section
10.4.10 does not grant the MA the discretion to change the overall common expense
liability allocation set out in exhibit B. Because there is no discretion to change the
common expense liability allocation, any challenge to the original allocation accrued in
2006.
Plaintiffs next argue that there is at least a question of genuine fact over whether
the limitations period should be tolled. This argument fails for two reasons. First,
plaintiffs cite Green v. A.P.C., 136 Wn.2d 87, 95, 960 P.2d 912 (1998), Alexander v.
Sanford, 181 Wn. App. 135, 325 P.3d 341 (2014), and Norris v. Church & Co., Inc., 115
Wn. App. 511, 514, 63 P.3d (2002), as authority for application of the discovery rule to
their claims. These cases do not support the plaintiffs.
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No. 77017-9-I/13
In Green, our Supreme Court extended the discovery rule to cover personal
injuries arising from exposure to toxic substances where there was no evidence that the
plaintiff should have known their injury existed more than three years before filing suit.
Green, 136 Wn.2d at 100.
Alexander, involved claims against a condominium developer and board
members of the condominium association arising from latent construction defects that
the developer and condominium board knew about but hid from unit owners until after
the statute of limitations had run. Alexander, 181 Wn. App. at 142-48. This court held
that claims for breach of board member duty of care, CPA claims, negligent
misrepresentation, and fraud by omission and misrepresentation, arising out of the
latent defects were tolled until a 2011 meeting with the unit owners where the board
declared a budget with a special assessment for the costs of the repairs. Alexander,
181 Wn. App. at 148, 168.
Similarly, Norris involved latent construction defects in a new home. While the
homeowners learned that the home leaked shortly after moving in, it was not until four
years later that a thorough inspection revealed significant damage resulting from
defects during the original home construction. The court applied the discovery rule,
holding that the cause of action for fraudulent concealment did not accrue until the
homeowners discovered or could have discovered the latent defects. Norris, 115 Wn.
App. 516-17.
All three of the cited cases concern latent defects or injuries—defects or injuries
that could not reasonably be discovered within the relevant statute of limitations. In
contrast, here, the claims asserted by the plaintiffs arise from the original master
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declaration and common expense liability calculation—neither of which were hidden.
The cases cited by plaintiffs do not support extension of the discovery rule to claims
arising from condominium formation documents and we decline to do so.6
Second, while plaintiffs assert that the source of the “unfair” allocation was
“newly discovered evidence,” there is no dispute that the common expense liability
allocation was set forth in the public offering statement and provided to every original
buyer at 2200 Westlake before they bought their units. The master declaration,
including exhibit B, were also recorded. Recording gives constructive notice to all future
purchasers. Shephard v. Holmes, 185 Wn. App. 730, 740-41, 345 P.3d 786 (2014)
(citing Strong v. Clark, 56 Wn.2d 230, 232-33, 352 P.2d 183 (1960)).7
Because the statute of limitations accrued in 2006 with the recording of the
master declaration and exhibit B, the trial court did not err in dismissing the plaintiffs’
claims against the MA, Vulcan, and Urban Ventures arising out of the master
declaration.8
III.
The plaintiffs next argue that the trial court erred in its September 29, 2015, order
on summary judgment, when it dismissed their derivative claims brought on behalf of
6
While, as discussed below, a condominium declaration is not a contract, the plaintiffs’ claims
sound more in contract than construction defects or personal injury. Our Supreme Court has made clear
that a breach of contract claim accrues on the date of the breach, not discovery of the breach. 1000
Virginia Ltd P’ship v. Vertecs, 158 Wn.2d 566, 576-78, 146 P.3d 423 (2006).
7
Further, it is undisputed that at least Grace knew the basic facts of his claims. In October 2008,
Grace complained about the governance structure and common expense allocation to other owners,
arguing, “We are literally losing money to Vulcan from Master dues[.]” In the same email, Grace
acknowledged that time for taking legal action to advance these concerns was limited, warning that “[t]ime
(statute of limitations, money being lost, political inertia, falsified and missing records) is against us.”
8
The plaintiffs also challenge the trial court’s order dismissing their individual claims against the
MA based on lack of standing. Because we hold that the plaintiffs’ claims against the MA are barred by
the statute of limitations, we do not reach their standing argument.
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No. 77017-9-I/15
the RA and MA. The plaintiffs contend that the trial court erred as a matter of law in
concluding that individual condominium association members do not have derivative
standing. We disagree.
The parties do not dispute that both the MA and RA were incorporated under the
Washington Nonprofit Corporation Act (WNCA), chapter 24.03 RCW. The WNCA was
enacted in 1967. See Laws of 1967, ch. 235. The WNCA governs all aspects of
nonprofit corporations, including incorporation, permissible purposes, and dissolution.
See, e.g., RCW 24.03.015, .020, .025, .220-276. Nonprofit corporations are managed
by an elected or appointed board of directors according to the corporation’s articles of
incorporation or bylaws. RCW 24.03.095 - .100. In contrast to for-profit corporations,
which are organized under the Washington Business Corporation Act (WBCA), chapter
23B.01 RCW, nonprofit corporations do not have shareholders, but instead may “have
one or more classes of members or may have no members.” RCW 24.03.065(1);
compare RCW 23B.01.400(34).
The WBCA expressly authorizes shareholders of for-profit corporations to bring
derivative actions on behalf of the corporation. RCW 23B.07.400. “In a derivative suit,
a stockholder asserts rights or remedies belonging to the corporation for the
corporation’s benefit.” Haberman v. Washington Pub. Power Supply Sys., 109 Wn.2d
107, 147, 744 P.2d 1032 (1987). The WNCA, in contrast, does not authorize members
to bring derivative actions on behalf of the nonprofit corporation against third parties.
Instead, the WNCA provides only two circumstances where a member may seek judicial
relief on behalf of the nonprofit corporation: (1) a “representative suit” against an officer
or director exceeding their authority, or (2) in order to seek dissolution of the nonprofit
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No. 77017-9-I/16
where the directors have acted “in a manner that is illegal, oppressive, or fraudulent” or
“where assets are being misapplied or wasted.” RCW 24.03.040, .266(1).
Relying on the “plain and unambiguous” language of the WNCA, as well as its
legislative history, the court rejected the plaintiffs’ argument that nonprofit members
have an equitable common law right to bring derivative actions in Lundberg ex rel.
Orient Found. v. Coleman, 115 Wn. App. 172, 176, 60 P.3d 595 (2002). In Lundberg, a
director attempted to bring a derivative action on behalf of a nonprofit corporation
against other directors, alleging that they had breached their fiduciary duties. 115 Wn.
App. at 176. This court held that the legislature intended to limit derivative lawsuits to
the narrow circumstances addressed in the statute, reasoning it “carefully delineates
when actions may be brought on behalf of the corporation.” Lundberg, 115 Wn. App. at
177 (citing RCW 24.03.040 and former RCW 24.03.265).
Under Lundberg, plaintiffs do not have a right to bring a derivative action on
behalf of the nonprofit RA or MA. Their efforts to distinguish Lundberg are not
persuasive. The trial court did not err when it dismissed the plaintiffs’ derivative claims
brought on behalf of the RA and MA.
IV.
The plaintiffs next challenge the trial court’s decision in its February 12, 2016,
order on the defendants’ motion for judgment on the pleadings, concluding the plaintiffs’
breach of contract claims against the RA were barred by res judicata. The trial court’s
decision was based on the prior litigation between Grace and the RA. While we agree
that, based on the pleadings before the trial court, it appears Mohandessi’s individual
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No. 77017-9-I/17
claims would not be barred by res judicata, we need not reach this issue because the
plaintiffs’ complaint failed to state a cause of action for breach of contract.
We review a CR 12(c) motion for judgment on the pleadings de novo. M.H. v.
Corp. of Catholic Archbishop of Seattle, 162 Wn. App. 183, 189, 252 P.3d 914 (2011).
A dismissal under CR 12(c) is appropriate only if “it appears beyond doubt that the
plaintiff can prove no set of facts, consistent with the complaint, which would entitle the
plaintiff to relief.” Haberman, 109 Wn.2d at 120 (internal quotation marks omitted).
The plaintiffs’ original complaint alleged two claims against the RA: (1) breach of
contract based on the assertion that the master and residential declarations were
contracts and (2) breach of implied covenant of good faith and fair dealing again based
on the assertion that the master and residential declarations were contracts. These
claims fail as a matter of law.
“A contract is a promise or set of promises for the breach of which gives a
remedy, or the performance of which the law in some way recognizes as a duty.”
Restatement (Second) of Contracts § 1 (1981); accord Washington Fed’n of State
Emps., AFL-CIO, Council 28, AFSCME v. State, 101 Wn.2d 536, 549, 682 P.2d 869
(1984). In contrast, condominium declarations are not promises between parties, but
are recorded real property instruments. Bellevue Pac. Ctr. Condo. Owners Ass’n v.
Bellevue Pac. Tower Condo Ass’n, 124 Wn. App. 178, 188, 100 P.3d 832 (2004).
Condominium owners are not bound to declarations under the same rules as parties to
a contract. Rather, owners have the power to amend a declaration by vote. See RCW
64.32.090(13); RCW 64.34.264(1). Here, the residential declaration may be amended
by consent of more than 67 percent of the owners.
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No. 77017-9-I/18
Because the plaintiffs failed to allege a cause of action supporting a breach of
contract claim against the RA, dismissal of the plaintiffs’ breach of contract claims was
appropriate.9
V.
The plaintiffs next contend that the trial court erred when it dismissed their
twenty-first claim: that the 2012 settlement agreement was void as the product of fraud
and collusion. The plaintiffs argue that the trial court dismissed their claim sua sponte.
We disagree.
On March 17, 2017, the remaining defendants moved for summary dismissal of
all the plaintiffs’ remaining claims. Vulcan and Urban Venture argued, among other
things, that the 2012 settlement agreement barred the plaintiffs’ claims. Before the
plaintiffs responded to the motions for summary judgment they sought leave to amend
their complaint to add their twenty-first claim: that the 2012 settlement agreement was
void as collusive, fraudulent, and against public policy. In support of their motion,
plaintiff submitted argument and multiple exhibits in support of the twenty-first claim.
The plaintiffs then argued in response to the motions for summary judgment that the
2012 settlement agreement was void as the product of fraud and collusion.
By the time of the summary judgment hearing, the trial court had granted leave to
amend, and the plaintiffs had filed their third amended complaint. During argument
Urban Venture and Vulcan confirmed that they were seeking dismissal of all claims,
9
The plaintiffs subsequently amended their complaint to add claims against the RA for breach of
the residential declaration arising from the RA’s entry into the November 2012 settlement agreement. On
December 20, 2016, the plaintiffs voluntarily dismissed their claims against the RA. Thus, as of
December 20, 2016, there were no claims remaining against the RA.
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No. 77017-9-I/19
including specifically the twenty-first claim based on the briefing submitted. The
plaintiffs did not object that the issue had not been properly raised or adequately
briefed. The plaintiffs instead argued the merits of their claim.
Because the plaintiffs did not object to the trial court deciding the twenty-first
claim, the plaintiffs’ argument that the dismissal was sua sponte fails. The plaintiffs
have not explained how the twenty first claim can survive a motion for summary
judgment and therefore have waived this argument on appeal.
VI.
All parties appeal the trial court’s award of attorney fees and costs. The plaintiffs
challenge the court’s award of attorney fees under the 2012 settlement agreement. The
defendants cross appeal and challenge the trial court’s decision to reduce their attorney
fees to the portion spent defending the 2012 settlement agreement. The defendants
further challenge the trial court’s failure to award attorney fees under Condominium Act.
We affirm the trial court’s award of fees under the 2012 settlement agreement to Urban
Venture, Vulcan, and the RA.
In Washington, attorney fees may be awarded when authorized by a contract, a
statute, or a recognized ground in equity. Fisher Props., Inc. v. Arden-Mayfair, Inc., 106
Wn.2d 826, 849-50, 726 P.2d 8 (1986). Whether a contract or law authorizes an
attorney fee award is question of law and reviewed de novo. Kaintz v. PLG, Inc., 147
Wn. App. 782, 786, 197 P.3d 710 (2008). Whether the amount of fees awarded was
reasonable is reviewed for abuse of discretion. Ethridge v. Hwang, 105 Wn. App. 447,
460, 20 P.3d 958 (2001). We review the trial court’s interpretation of statutory costs
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No. 77017-9-I/20
provisions de novo. McConnell v. Mothers Work, Inc., 131 Wn. App. 525, 532, 128 P.3d
128 (2006).
A.
The 2012 settlement agreement provides for prevailing party fees “arising from
the need to take action to enforce this Agreement, including mediation, arbitration, or
litigation.” The trial court awarded defendants their attorney fees “they needed to incur
to take action to enforce the Settlement Agreement.”
The plaintiffs contend that the RA owners are not bound by the terms of the 2012
settlement agreement for several reasons. The plaintiffs contend, “the residents were
not involved in negotiations, nor were they represented by counsel.” And further, the
RA owners “never voted on, let alone approved, the terms of the settlement agreement;
the [RA owners] did not sign the settlement agreement; [RA owners] were not told that
the settlement agreement could impact their personal rights or liabilities; and residents
were not told that a settlement had been reached until after the agreement had been
executed.”
The plaintiffs’ argument fails because RCW 64.34.304 provides unit owners’
associations with the power to “institute, defend, or intervene in litigation or
administrative proceedings in its own name on behalf of itself or two or more unit
owners on matters affecting the condominium” and “make contracts and incur liabilities.”
RCW 64.34.304(1)(d), (e). The residential declaration provides the same owners
association powers. In the 2012 settlement agreement, RA means “any officer, director,
manager, member, unit owner, principal, partner, predecessor, successor, agent,
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No. 77017-9-I/21
shareholder, and/or employee.” Thus, the 2012 settlement agreement intended to bind
RA members.
Our Supreme Court has recognized that in a condominium “each owner, in
exchange for the benefits of association with other owners, must give up a certain
degree of freedom of choice which he [or she] might otherwise enjoy in separate,
privately owned property.” Lake, 169 Wn.2d at 535 (citation and internal quotation
marks omitted). Thus, the RA had the authority to enter and bind the RA owners
because they agreed to give up certain freedoms, such as being signatories on a
settlement agreement where the RA settled construction defects on behalf of the
association and the RA owners. The plaintiffs have not cited any part of the residential
declaration that requires the RA owners to vote before the RA enters a settlement
agreement for construction defects, thus their argument that the RA owners are not
bound because they did not vote fails.
The trial court did not err in awarding the defendants attorney fees under the
2012 settlement agreement.
B.
While the trial court awarded the defendants their attorney fees under the 2012
settlement agreement, it limited its award to time spent defending against the claim that
the 2012 settlement agreement was void.
The RA originally requested attorney fees of $380,862.50 for its entire defense.
The trial court subsequently granted the RA’s reduced fee request of $74,245.00 for its
work defending the 2012 settlement agreement. The court also granted the MA’s
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No. 77017-9-I/22
reduced fee request, awarding $49,521. The trial court rejected Urban Venture and
Vulcan’s reduced fee request of $813,605 and reduced it further to $299,198.
The defendants argue that the trial court erred because all of the plaintiffs’ the
claims involved a common core of facts or legal theories. The trial court carefully
considered this claim below explaining:
Plaintiffs brought a total of 21 claims, of which thirteen made no
reference to the Settlement Agreement and sought no relief that would
appear to require any of the defendants to incur fees arising from the need
to enforce that agreement. Plaintiffs brought their first, second, third, fifth,
seventh, eighth, twelfth, fourteenth, fifteenth, sixteenth, nineteenth, and
twentieth claims individually and/or derivatively against various defendants
for allegedly violating the Washington Condominium Act by failing to state
the formulas and methods used to establish the “Declared Value” on
which they allegedly based the allocation of common expenses, by
oppressing RA and its owners, by aiding and abetting those actions, by
breaching the Declaration, and by tortious interference. Plaintiffs’
eighteenth claim sought an accounting, derivatively, on behalf of the RA
against the MA. Those claims did not involve a common core of facts or
are based on related legal theories arising from defendants’ need to
enforce the Settlement Agreement. Defendants are not entitled to an
award of fees incurred in defense of those claims and must segregate
those fees.
Plaintiff’s fourth, ninth, tenth, and seventeenth claims mentioned
the Settlement Agreement. The first of those claimed breach of the
Residential Declaration and Governing Documents by, among other
things, failing to reach an adequate settlement for construction defects in
the 2200 Condominium. Plaintiffs’ ninth and seventeenth claims for unjust
enrichment were against UV individually and Vulcan derivatively,
respectively. Those claims related to UV and/or Vulcan’s alleged receipt
of benefits that should have flowed to residents, which allegedly included
improper settlement proceeds, among others. Plaintiffs brought their tenth
claim for violation of the Washington Condominium Act and Governing
Documents derivatively on behalf of RA against UV and MA and
derivatively on behalf of MA against UV. Plaintiffs primarily based this
claim on the misallocation of common expenses and the appointment of
conflicted board members, but that claim included a reference to the
settlement of construction defect claims. Notably, none of those claims
sought recession or otherwise indicated that the Settlement Agreement
should not be enforced. But to the extent defendants can show that they
incurred fees arising from the need to enforce the Settlement Agreement
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No. 77017-9-I/23
in relation to those claims and they segregate those fees, they would be
entitled to such an award.
Plaintiffs’ twenty-first claim is the one claim that truly appears aimed at the
enforceability of the Settlement Agreement. In that claim, plaintiffs
contend that the Settlement is void, collusive, fraudulent, and against
public policy. This claim also relates to plaintiffs’ sixth prayer for relief that
seeks a judgment declaring that agreement unenforceable (the other eight
prayers for relief do not mention the Settlement Agreement). Defendants
are entitled to those fees incurred in relation to this claim so long as they
segregate them from those they did not incur arising from the need to
enforce the Settlement Agreement.
We cannot conclude that the trial court abused its discretion in limiting the fees it
awarded under the 2012 settlement agreement.
C.
The defendants next challenge the trial court’s decision to not award attorney
fees under the Condominium Act. The Condominium Act provides that “the court, in an
appropriate case, may award reasonable attorney’s fees to the prevailing party.” RCW
64.34.455. The trial court denied the defendants’ claim for attorney fees under the
Condominium Act and denied their motions for reconsideration.
As the trial court explained in denying Urban Venture and Vulcan’s motion for
reconsideration:
This Court held that UV and Vulcan were prevailing parties, but this Court
did not believe this was an appropriate case to award their attorney’s fees
for the reasons stated on the record at the September 12, 2017 hearing.
UV and Vulcan rely on Bilanko v. Barclay, [185 Wn.2d 443, 375 P.3d 591
(2016)] Defendants contend this Court erred in reaching the latter
conclusion. They argue that Bilanko is “factually indistinguishable” from
this case, apparently because the Supreme Court affirmed the dismissal
of the plaintiff’s claims on statute of limitations grounds and noted that the
plaintiff could have moved.
Despite those two similarities, Bilanko is dissimilar from this case in
several critical respects that UV and Vulcan do not acknowledge.9 Here,
plaintiffs brought their claims not to enrich themselves but to derivatively
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No. 77017-9-I/24
benefit the 2200 Residential Association (RA) and directly benefit their
fellow condo owners. They brought those claims as consumers to
address what they perceived to be the unfair imposition of costs on RA by
the [MA], Urban Venture LLC, and Vulcan Inc. Notably, this Court found
merit to that claim and a violation by defendants of the Washington
Condominium Act: the Declared Values that the Declaration used to
apportion those costs were simply made-up values rather than being
based on a method or formula that is capable of calculation. Further,
while the defendants make much of this Court’s reference to the “scorched
earth” litigation in this case, this Court noted that both sides were to
blame. Indeed, plaintiffs’ opposition to defendants’ motions for
reconsideration sets forth many examples of defendants’ own role in
driving up the costs of this litigation.
___________________________________________________________
9 Even if Bilanko was indistinguishable in all respects with this case, and it is
plainly not, the Washington Supreme Court merely exercised its discretion to award fees
in that case. Nowhere in that decision did the Washington Supreme Court hold that it
would have been an abuse of discretion for a court to not award fees when faced with
those facts.
Similarly, as the trial court explained in denying the RA’s motion for reconsideration:
RA contends this Court erred primarily by applying to RA its
rationale for not awarding fees to [MA], and Vulcan and Urban Venture,
LLC. . . . In its oral ruling this Court did emphasize that plaintiffs, in their
role as consumers and on behalf of similarly situated residents, brought
consumer protection claims of self-dealing and illegal control against the
defendants. RA fails to acknowledge the reason why plaintiffs had to
occupy those roles: RA failed to take any action to address the fact that
the Declared Valued in the Declaration were based on made-up values
rather than being based on a method or formula that is capable of
calculation. Further, RA joined forces with the other defendants to actively
oppose plaintiffs’ claims at every turn. Finally, while RA makes much of
this Court’s reference to the “scorched earth” litigation in this case, this
Court notes that RA shared much of the blame. Indeed, plaintiffs’
opposition to the [defendant] motion for reconsideration sets forth many
examples of defendants’ own role in driving up the costs of this litigation.
We agree with the trial court. An award of attorney fees under RCW 64.34.455 is
discretionary. We cannot conclude that the trial court abused its discretion in denying to
award attorney fees under the Condominium Act.
We affirm the trial court’s denial of attorney fees under the Condominium Act.
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No. 77017-9-I/25
VII.
The plaintiffs finally argue that the trial court erred by awarding costs for
“mediator fees, meals, travel, expert fees, consultant fees, or document review
expenses” under the Declaratory Judgment Act, RCW 7.24.100. The plaintiffs contend
that “costs” should have been limited to costs allowed under RCW 4.84.010. We
disagree.
We review questions of statutory interpretation de novo. State v. Dennis, 191
Wn.2d 169, 172, 421 P.3d 944 (2018). If a statute’s meaning is plain on its face, then
the court must give effect to the plain meaning as an expression of legislative intent.
Dep’t of Ecology v. Campbell & Gwinn, LLC, 146 Wn.2d 1, 9-10, 43 P.3d 4 (2002).
RCW 7.24.100 provides “In any proceeding under this chapter, the court may
make such award of costs as may seem equitable and just.” RCW 7.24.100 “gives the
court broader discretion with regard to costs than courts have in other kinds of
proceedings.” 15 DOUGLAS J. ENDE, WASHINGTON PRACTICE: CIVIL PROCEDURE § 42.24
(3d ed. 2018). The legislature’s use of the word “may” confers discretion. Strenge v.
Clarke, 89 Wn.2d 23, 28, 569 P.2d 60 (1977). Empowering a court to do what is
“equitable” and “just” also indicated broad discretion. Farmer v. Farmer, 172 Wn.2d
616, 624, 259 P.3d 256 (2011). Nothing in the statute limits a court’s discretion.
The trial court did not abuse its discretion in awarding costs under RCW
7.24.100.
VIII.
All parties request attorney fees on appeal. Under RAP 18.1, we may grant
attorney fees “if applicable law grants to a party the right to recover reasonable attorney
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No. 77017-9-I/26
fees or expenses on review.” As discussed above, the Condominium Act grants
discretion for the court “in an appropriate case,” to award reasonable attorney fees to
the prevailing party. RCW 64.34.455. Here, the MA, RA, Urban Venture, and Vulcan
are the prevailing parties, subject to compliance with RAP 18.1 we award their attorney
fees on appeal.
Affirmed.
WE CONCUR:
__________________________________
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Shamim Mohandessi And Joseph Grace, Apps/cross-res. v. Urban Venture, Llc, Res/cross-apps.
Combined Opinion