IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
MADERA WEST CONDOMINIUM No. 68127-3-1
ASSOCIATION, a Washington non (Consolidated with
profit corporation; THOMAS FASSLER; No. 68522-8-1)
JOHN BERRY; TAMARA VERA;
MICHELLE DONALDSON; JACK DIVISION ONE
RADFORD; JAY INGWALDSON;
DOROTHY ROCKEY; ALLAN FULLER;
SCOTT PERRY; RYAN FIDLER;
DANIELLE TOWNSEND; DIANA
CRETTOL; HANNAH ALMARAZ; UNPUBLISHED
KEITH BRETT; LEONOR CASTELLAR;
GARY EVANS; LATRELLE GIBSON; FILED: July 1.2013
LINDA GRESETTE; RICHARD
HARRISON; CINDY KALLENBERG;
BRENNA LARSEN-THIEL; CANDICE
McKINNEY; JAYNE MILLER; MICHAEL
OCTAVE; HENRI PARREN; PAUL
PATTELLE; TONI POSEY; KELLY
ROBINSON; MICHAEL SMITH;
JEROME SZYMANSKI; STEVEN
TOLLEY; ERIN ZAMORA; ROCIO
TRUJILLO; GWEN BERVEN; MARY
BIZZELL; PAUL BOVA; ALYSON
BROWN; ADAM CARTER; ALTHEA
CHANG; JENNIFER COPE; JEFF
DANNENBERG; LEE ELLIOTT; GARY r*-3
GESELL; JONATHAN JONES;
COURTNEY LINDSAY; MICHAEL
OKUDA; GABRIEL ORTIZ; MARCIA -•i
jp -
i
PETERSON; ERIK SOCTT; DAN
SKINNER; DIANNA STACY; JIMMIE
STOKES; BEVERLY STOKES; ADAM
STOKES; LINDA UPSHAW; ROSIE S9 :3
ro °
WHITE; ERIK WINKLER; and KARL
YAUCH, Washington residents,
Appellants/Respondents,
v.
No. 68127-3-1 (Consolidated with No. 68522-8-l)/2
MARX/OKUBO, a Washington
corporation,
Respondent/Appellant,
MADERA WEST, LLC, a Washington
corporation; JESSE NELSON, a
Washington resident; and COLDWELL
BANKER BAIN ASSOCIATES, a
Washington corporation,
Defendants.
Cox, J. — Madera West Condominium Association and multiple individual
condominium unit owners (collectively "COA") appeal the summary dismissal of
their action for negligence against the architectural firm of Marx/Okubo &
Associates, Ltd. ("Marx/Okubo"). Marx/Okubo appeals the trial court's denial of
its motion for attorney fees and sanctions under CR 11 and CR 26(g). We
consolidate these linked appeals for decision.
The COA fails to show that Marx/Okubo owed it any statutory or common
law duty for a professional negligence claim. Thus, there are no genuine issues
of material fact for trial on this claim. Further, the negligent misrepresentation
claim has been abandoned on appeal.
Marx/Okubo fails to show that it is either entitled to an award of attorney
fees or that the trial court abused its discretion in denying sanctions. We affirm.
In 1996, Marx/Okubo inspected and evaluated the condition of the Forest
Village Apartments' ("Apartments") siding for the Apartments' then owner. The
siding was evaluated based on criteria established by a class action suit against
No. 68127-3-1 (Consolidated with No. 68522-8-l)/3
the siding's manufacturer. Marx/Okubo concluded that approximately 35 percent
of the siding was damaged.
In 2005, A.F. Evans Development, Inc. ("A.F. Evans"), the prospective
purchaser of the Apartments, hired Marx/Okubo to inspect the property. The
purposes of this inspection included determining the condition of the property in
preparation for A.F. Evans to convert the property to condominiums.
Marx/Okubo inspected the Apartments and produced a "Property
Condition Assessment" in April and a "Reserve Study" in May. The property
assessment summarized Marx/Okubo's "review of the physical conditions;
architectural, mechanical, and electrical components . . . and the quality of
construction." The reserve study provided "a forward projection of major costs of
repairs and replacements that the Forest Village Homeowners Association
should anticipate in planning and budgeting for a reserve fund."
Marx/Okubo gave the following summary of the Apartments' siding: "The
siding appears to be performing as expected considering the age and use of the
buildings. Isolated areas of siding damaged from rainwater splash were
observed."
In May 2005, A.F. Evans purchased the property. Thereafter, the property
was converted to condominiums. Madera West, LLC ("MW, LLC"), was the
developer and declarant of the Madera West Condominiums ("Madera West").
The COA commenced this action against MW, LLC, and others. The COA
later joined Marx/Okubo as a defendant. In its Third Amended Complaint, the
No. 68127-3-1 (Consolidated with No. 68522-8-l)/4
COA asserted claims for negligent misrepresentation and professional
negligence against Marx/Okubo.1
In November 2011, the COA and Marx/Okubo made cross motions for
summary judgment. Marx/Okubo argued that the COA failed to establish a
negligent misrepresentation claim and that it did not owe the COA a duty for a
professional negligence claim. In the COA's motion for partial summary
judgment, the COA sought determinations that (1) the COA had standing to
pursue its negligence claims on its own behalf and on behalf of individual unit
owners, and (2) Marx/Okubo breached a duty of care it owed to the COA.
Additionally, the COA moved to strike portions of Randy Hart's declaration that
Marx/Okubo submitted in opposition to the COA's motion for partial summary
judgment. Hart is an architect and a principal at an engineering firm who
reviewed the records produced in discovery for this case.
The trial court granted Marx/Okubo's motion for summary judgment and
dismissed, with prejudice, all of the COA's claims against Marx/Okubo. It also
denied the COA's motion for partial summary judgment and dismissed its claims
based on lack of standing. For purposes of this latter motion only, the court also
denied the COA's motion to strike portions of Hart's declaration.
In February 2012, Marx/Okubo moved for an award of attorney fees and
sanctions. The trial court denied both requests.
The COA and Marx/Okubo both appeal.
1Clerk's Papers (No. 68127-3) at 700-716.
No. 68127-3-1 (Consolidated with No. 68522-8-l)/5
PRELITIGATION NOTICE
The COA argued in its briefing on appeal that it was not required to give
Marx/Okubo prelitigation notice. Marx/Okubo contends that this issue is moot.
We agree that this issue is moot, and the COA properly conceded this point at
oral argument on appeal.
Generally, this court will not consider a moot issue unless it involves
"'matters ofcontinuing and substantial public interest.'"2 "'A case is technically
moot if the court cannot provide the basic relief originally sought... or can no
longer provide effective relief.'"3 Mootness is a question of law that this court
reviews de novo.4
There are exceptions that permit a court to reach a moot issue, but these
exceptions do not apply to this case.
Here, the trial court granted the COA's motion for leave to rejoin
Marx/Okubo as a party after it complied with the prelitigation notice requirement
and statutory procedures. Because this court cannot provide any reliefthat the
trial court has not already provided, this issue is moot. We need not address this
issue further.
2 In re Cross. 99 Wn.2d 373, 377, 662 P.2d 828 (1983) (quoting Sorenson
v.CitvofBellingham. 80 Wn.2d 547, 558, 496 P.2d 512 (1972)).
3 Dioxin/Organochlorine Ctr. v. Pollution Control Hearings Bd.. 131 Wn.2d
345, 350-51, 932 P.2d 158 (1997) (citations omitted) (quoting Snohomish County
v. State, 69 Wn. App. 655, 660, 850 P.2d 546 (1993)).
4 Hilltop Terrace Homeowner's Ass'n v. Island County. 126 Wn.2d 22, 29,
891 P.2d29(1995).
No. 68127-3-1 (Consolidated with No. 68522-8-l)/6
STANDING
The COA next argues that the trial court erred when it summarily
dismissed the Condominium Owners Association's ("Association") claims against
Marx/Okubo on the basis that the Association lacked standing. We agree in part.
Because we refer to the Association and the individual unit owners
collectively as the "COA," we refer to the Association separately when discussing
its standing.
A motion for summary judgment may be granted when there is no genuine
issue of material fact, and the moving party is entitled to a judgment as a matter
of law.5 This court reviews a summary judgment order de novo, viewing the facts
and reasonable inferences in the light most favorable to the nonmoving party6
There are two issues. The first is whether the Association lacked standing
to bring the claims on its own behalf. The second is whether the Association
lacked standing to bring the claims on behalf of condominium unit owners. We
address each issue separately.
The Association's Standing on Behalf of Itself
The COA argues that the Association has standing to bring claims on its
own behalf. It contends that the Association has a property interest in Madera
West's common elements and the reserve account, which satisfies the standing
requirements. We disagree.
5CR 56(c).
6 Lam v. Global Med. Svs.. Inc.. 127 Wn. App. 657, 661 n.4, 111 P.3d
1258(2005).
No. 68127-3-1 (Consolidated with No. 68522-8-l)/7
Under RCW 64.34.304(1 )(d) of the Washington Condominium Act, a unit
owners' association may "[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."7 But in order for a unit
owners' association to bring a claim on its own behalf, it must prove that it has
standing independent from the unit owners.8
"The doctrine of standing prohibits a litigant from raising another's legal
rights."9 A party has standing if it demonstrates that it has "'a present, substantial
interest"' and that it will accrue a benefit by the relief granted.10
In Satomi Owners Association v. Satomi, LLC, the supreme court
addressed a condominium owners' association's standing to bring claims on its
own behalf against a developer and subcontractors.11 The court looked to
whether the association alleged damage to any property in which it had a
"protectable interest" to determine whether it had standing independent from the
unit owners.12
7 (Emphasis added.)
8 See Satomi Owners Ass'n v. Satomi. LLC. 167 Wn.2d 781, 812, 225
P.3d 213 (2009).
9 Haberman v. Wash. Pub. Power Supply Svs.. 109 Wn.2d 107, 138, 744
P.2d 1032 (1987), opinion amended bv 109 Wn.2d 107, 750 P.2d 254 (1988).
10 Timberlane Homeowners Ass'n. Inc. v. Brame, 79 Wn. App. 303, 307-
08, 901 P.2d 1074 (1995) (quoting Primark. Inc. v. Burien Gardens Assocs.. 63
Wn. App. 900, 907, 823 P.2d 1116 (1992)).
11 167 Wn.2d 781, 811-13, 225 P.3d 213 (2009).
12 Id. at 812.
No. 68127-3-1 (Consolidated with No. 68522-8-IJ/8
The association asserted five claims on its own behalf under RCW
64.34.304(1 )(d).13 It further alleged that the damages included "the cost of
repairing the project. . . and resulting monetary and material harm."14 The
"project" involved individual units, common elements, and limited common
elements.15
The court concluded that the association lacked standing to bring the five
claims on its own behalf because it did not have a "protectable interest" in the
property that was allegedly damaged.16 Specifically, it did not own the units or
the common elements that were allegedly damaged.17 "Common elements" are
"all portions of a condominium other than the units."18
Here, the COA brought two claims against Marx/Okubo: negligent
misrepresentation and professional negligence. In its third amended complaint, it
alleged that the damage it suffered included "the cost of repairing the damage to
the Project caused by defective workmanship and materials and related costs,
the cost of correcting defective conditions and related costs, consequential
damages, the loss of use, stigma damages, investigation costs and litigation
expenses."
13|g\at811,812n.24.
14 ]g\ at 811-12 (internal quotation marks omitted).
15 |g\ at 812.
16jcL
1714
18 RCW 64.34.020(7).
No. 68127-3-1 (Consolidated with No. 68522-8-l)/9
To demonstrate that the Association has independent standing, the COA
must show that the Association has a protectable interest in the property that was
allegedly damaged. Here, the COA contends that the Association has a
protectable interest in Madera West's common elements and in the reserve
account. But under Satomi, the Association does not have a protectable interest
in this property.19
First, like Satomi. the Association does not have a "protectable interest" in
Madera West's common elements because they are owned by the unit owners,
not the Association.20
Second, the Association does not have a "protectable interest" in the
reserve account. A unit owners' association may establish a "reserve account" to
"fund major maintenance, repair, and replacement of common elements."21 As
Marx/Okubo argues, the Association may "[establish and administer a reserve
account" for the benefit of the common elements.22 But the Association itself
does not receive a benefit from administering the reserve account.23 As with the
19 Satomi. 167 Wn.2d at 812.
20kL
21 RCW 64.34.380(1).
22 RCW 64.34.304(1 )(p); RCW 64.34.380.
23 See, e.g., RCW 64.34.356 ("Unless otherwise provided in the
declaration, any surplus funds of the association remaining after payment of or
provision for common expenses and any prepayment of reserves shall, in the
discretion of the board of directors, either be paid to the unit owners in proportion
to their common expense liabilities or credited to them to reduce their future
common expense assessments.").
No. 68127-3-1 (Consolidated with No. 68522-8-l)/10
"common elements" in Satomi. the Association does not have "protectable
interest" in the reserve account.24
Since the Association did not have a "protectable interest" in the common
elements or reserve account, the trial court properly decided that the Association
did not have standing independent from the unit owners.
The COA argues that the Association had some property interest in the
common elements and reserve account.25 But under Satomi. the issue is
whether the Association had a "protectable interest" in this property.26 Whatever
interest the Association may have in this property does not rise to the level of a
"protectable interest" under Satomi.27 Further, the COA fails to demonstrate how
the Association would benefit from any relief granted.28 Thus, we reject this
argument.
The Association's Standing on Behalf of Unit Owners
The prior discussion does not end our inquiry. The COA also argues that
even if the Association does not have standing independent of the unit owners
"at the very least it has standing to sue on behalf of the individual owners." We
agree.
24 Satomi. 167 Wn.2d at 812.
25 Reply Brief of Appellant at 20-21 (citing Affiliated FM Ins. Co. v. LTK
Consulting Services. Inc.. 170 Wn.2d 442, 457-58, 243 P.3d 521 (2010)).
26 Satomi. 167 Wn.2d at 812.
27 Id,
28 See Timberlane Homeowners Ass'n. Inc., 79 Wn. App. at 307-08.
10
No. 68127-3-1 (Consolidated with No. 68522-8-1)711
As we noted previously, under RCW 64.34.304(1 )(d), a unit owners'
association may "[ijnstitute, 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."29
As discussed above, in Satomi, the supreme court concluded that the
condominium association did not have standing to bring five claims on its own
behalf.30 Instead, the court found that the claims were "brought solely in a
representative capacity by Blakeley Association on behalf of its members who
own the allegedly damaged property."31
Similarly, here, the Association has standing to bring claims on behalf of
"two or more unit owners" of property that was allegedly damaged. Thus, the trial
court erred to the extent it dismissed the Association's claims made on behalf of
"unit owners on matters affecting the condominium."
PROFESSIONAL NEGLIGENCE
The COA argues that the trial court erred when it granted Marx/Okubo's
motion for summary judgment. The trial court dismissed the COA's negligent
misrepresentation as well as its professional negligence claims against
Marx/Okubo.32
29 (Emphasis added.)
30 Satomi. 167 Wn.2d at 812.
31 Jd,
32 Clerk's Papers (No. 68127-3) at 1640-41
11
No. 68127-3-1 (Consolidated with No. 68522-8-1)712
Significantly, on appeal, the COA only challenges the dismissal of the
professional negligence claim, effectively abandoning the negligent
misrepresentation claim made below.33 For example, in its appellate briefing, the
COA argues both a statutory and common law duty "to act with 'reasonable care
and competence.'"34 This is a statement of a duty regarding professional
negligence, not negligent misrepresentation. In addition, the COA expressly
distinguishes Marx/Okubo's cited case authority on the following basis: "[N]either
issue [in that case] was considered under the rubric of a professional negligence
claim. The claim at issue was for negligent misrepresentation."35 This shows the
COA's reliance on the professional negligence claim asserted below, not the
negligent misrepresentation claim.
Additionally, nowhere in its opening brief is there any discussion of or
citation to the Restatement (Second) of Torts § 552, which was the basis for the
COA's negligent misrepresentation claim below. This further demonstrates the
abandonment of this claim on appeal.
Thus, the sole question now before us is whether the trial court properly
dismissed the COA's professional negligence claim on the basis that
Marx/Okubo did not owe either a statutory or common law duty to the COA.
More specifically, given the discussion regarding standing, the issue is whether
Marx/Okubo owed a duty to individual condominium unit owners.
33BriefofAppellantat11-19.
34 ]d at 11 (quoting WAC 308-12-321(1)).
35 Id, at 18.
12
No. 68127-3-1 (Consolidated with No. 68522-8-IJ/13
To prevail on a negligence claim, a plaintiff must prove duty, breach,
causation, and injury.36 "Duty in a negligence action is a threshold question."37
To determine whether the law imposes a duty and what the measure and scope
of that duty are, a court weighs "considerations of 'logic, common sense, justice,
policy, and precedent.'"38 "A duty may be predicated 'on violation of statute or of
common law principles of negligence.'"39
The existence of a duty is a question of law.40 The plaintiff has the burden
ofestablishing both the existence and scope ofa duty.41
Statutory Duty
The COA argues that chapter 18.43 RCW, chapter 18.08 RCW, WAC
196-27A-020, and WAC 308-12-330 establish that Marx/Okubo owed it a duty of
care when it was performing engineering and architectural services. We
disagree.
"To determine whether a duty of care exists based upon a statutory
violation [the supreme court] has adopted the Restatement test, which, among
36 Keller v. City of Spokane. 146 Wn.2d 237, 242, 44 P.3d 845 (2002).
37 Jackson v. City of Seattle. 158 Wn. App. 647, 651, 244 P.3d 425 (2010).
38 Affiliated FM Ins. Co.. 170 Wn.2d at 449 (internal quotation marks
omitted) (quoting Snyder v. Med. Serv. Corp. of E. Wash., 145 Wn.2d 233, 243,
35 P.3d 1158 (2001)).
39 Jackson. 158 Wn. App. at 651-52 (quoting Burg v. Shannon &Wilson.
Inc.. 110 Wn. App. 798, 804, 43 P.3d 526 (2002)).
40 Schoolev v. Pinch's Deli Market. Inc.. 134 Wn.2d 468, 474, 951 P.2d
749(1998).
41 Id. at 475.
13
No. 68127-3-1 (Consolidated with No. 68522-8-1)714
other things, requires that the injured person be within the class of persons the
statute was enacted to protect."42 To determine whether a plaintiff is a member
ofa protected class, a court looks to the language ofthe statute.43 "Only after
the court defines the protected class will the jury then determine whether the
injury to the plaintiff was foreseeable."44
Under WAC 196-27A-020, registered engineers "are to safeguard life,
health, and property and promote the welfare of the public." "To that end,
registrants have obligations to the public, their employers and clients, other
registrants and the board."45
WAC 308-12-330(1 )(a)46 provides that "[wjhen practicing architecture, you
must act with reasonable care and competence, and must apply the technical
knowledge and skill which is ordinarily applied by architects of good standing,
practicing in the same locality."
In Burg v. Shannon & Wilson. Inc.. this court considered whether chapter
18.43 RCW and former WAC 196-27 (2001) imposed a duty on S & W, an
engineering firm.47 There, the trial court summarily dismissed the appellant
42 Id at 474-75.
43 id, at 475.
44 Id, at 475 n.3.
45 WAC 196-27A-020.
46 As Marx/Okubo notes, the COA cites WAC 308-12-321(1) in its brief,
but this particular section is no longer in effect. It appears that the COA meant to
cite WAC 308-12-330.
47 110 Wn. App. 798, 804-07, 43 P.3d 526 (2002).
14
No. 68127-3-1 (Consolidated with No. 68522-8-l)/15
homeowners' negligence claim on the basis that S &W did not owe a duty to the
homeowners 48 This court explained that the statutes and regulations "indicate
that professional engineers owe duties to the public, to their clients and to their
employers."49
But this court noted, "The broad pronouncements that engineers owe a
general duty to the public welfare alone do not establish that engineers owe a
duty to any identifiable group or individual."50 This court concluded that the
"[ajppellants [had] not met their burden of articulating how these statutes and
regulations impose a duty on S &W specific to them individually" and concluded
that summary judgment was appropriate.51
Here, we reach the same conclusion. The COA has not met its burden in
articulating how the broad pronouncements in chapter 18.43 RCW and WAC
196-27A-020, which relates to engineers, impose a duty that Marx/Okubo owed
to the unit owners. Like Burg, the unit owners were neither Marx/Okubo's client
nor employer at the time it completed its work. A.F. Evans was Marx/Okubo's
client. When Marx/Okubo entered into its agreement with A.F. Evans to inspect
the property and produce its reports, the Association was neither the client nor
the employer of the firm. Moreover, the purchase of the Apartments and the
ensuing conversion to condominiums had not occurred. Under these
48
Ji at 803.
49
14 at 807.
50
!i
51
Id.
15
No. 68127-3-1 (Consolidated with No. 68522-8-l)/16
circumstances, there is simply no showing of any duty owed under the statutory
and regulatory provisions on which the COA relies.
The COA attempts to distinguish Burg from the present case. But its
arguments are not persuasive.
First, it contends that Marx/Okubo created a report that was "specifically
prepared for reliance on by [the unit owners], making them akin to a client." But
as discussed above, at the time Marx/Okubo entered into an agreement with A.F.
Evans, no person had purchased a condominium unit and the COA did not exist.
Considering these facts, the argument that the unit owners were akin to clients is
not persuasive.
Second, the COA contends that chapter 18.43 RCW "applies to engineers
providing private services." It provides no further argument. Accordingly, we do
not further consider this claim.
Similarly, the COA does not explain why it falls within the protected class
under WAC 308-12-330(1 )(a). Mere citation to this regulation without any legal
CO
argument does not warrant our further consideration of this claim.
In sum, the COA failed to meet its burden in establishing that the unit
owners were within the scope of any statutory or regulatory duty imposed on
Marx/Okubo.
52 Cowiche Canvon Conservancy v. Boslev. 118 Wn.2d 801, 809, 828
P.2d 549 (1992).
16
No. 68127-3-1 (Consolidated with No. 68522-8-1)717
Common Law Duty
The COA next argues that the common law establishes that Marx/Okubo
owed the unit owners a professional's duty of care when it performed its services.
We hold that the COA has failed in its burden to show the firm owed any
common law duty for professional negligence to it.
"'Whether a defendant owes a duty of care to the complaining party is a
question of law.'"53 We review such questions de novo.54 Further, we may affirm
an order granting summary judgment on any basis supported by the record.55
In its attempt to show a duty under its professional negligence claim, the
COA relies on two cases: Affiliated FM Insurance Co. v. LTK Consulting
Services. Inc.56 and G.W. Construction Corp. v. Professional Service Industries,
Inc.57 Neither case is helpful to establish that Marx/Okubo owed a duty to the
COA.
In Affiliated, a fire on the Seattle Monorail caused millions of dollars in
losses to Seattle Monorail Services (SMS), a company that had the exclusive
concession to operate the Monorail System.58 The insurer for SMS, as subrogee,
53Schaafv.Highfield. 127 Wn.2d 17, 21-22, 896 P.2d 665 (1995) (quoting
Hansen v. Friend. 118 Wn.2d 476, 479, 824 P.2d 483 (1992)).
54 Sheikh v. Choe. 156 Wn.2d 441, 448, 128 P.3d 574 (2006).
55 LaMon v. Butler. 112 Wn.2d 193, 200-01, 770 P.2d 1027 (1989).
56 170 Wn.2d 442, 243 P.3d 521 (2010).
57 70 Wn. App. 360, 853 P.2d 484 (1993).
58 Affiliated. 170 Wn.2d at 443-44.
17
No. 68127-3-1 (Consolidated with No. 68522-8-1)718
commenced a tort action against LTK Consulting Services, Inc., an engineering
firm.59 The insurer alleged that LTK suggested the design of an electrical
grounding system that was allegedly at fault for causing the fire.60 The supreme
court stated the issue as "whether SMS, which does not own the Seattle
Monorail, can bring a tort action against LTK."61
Six justices of a divided court held that the "engineers' common law duty
ofcare has long been acknowledged in this state."62 In the lead opinion, signed
by two justices, the author cited this court's opinion in G.W. Construction Corp. v.
Professional Service Industries. Inc.63 There, this court held that "the defendant
engineer performing an inspection under contract had an independent 'duty to
exercise reasonable engineering skill and judgment.'"64
The lead opinion in Affiliated went on to state that a duty's scope involves
a question of law.65 It further stated that under the circumstances ofthat case
"the scope of an engineer's duty of care extends to the persons who hold a
legally protected interest in the damaged property."66 Then, the lead opinion
59 Id, at 443, 446.
60 kL
61 id at 444.
62 Id, at 454, 461,463.
63 ]g\ at 454 (citing G.W. Construction Corp.. 70 Wn. App. at 366).
64 |a\ (quoting G.W. Construction Corp.. 70 Wn. App. at 366).
65 Jd at 455.
66 ]g\ at 458.
18
No. 68127-3-1 (Consolidated with No. 68522-8-1)719
stated that LTK Consulting, an engineering firm, owed a duty to SMS, even
though the City of Seattle owned the monorail.67 SMS, as an operator, had a
property interest in the monorail.68 Thus, SMS was within the scope ofLTK's
duty of care.69
Here, the essence of the professional negligence claim that the COA
made below is that Marx/Okubo "fail[ed] to provide owners with all relevant
information in its reports, which they knew were prepared as a disclosure of the
existing condition of the [condominium] Project."70 By its plain terms, this claim
could serve as grounds for a negligent misrepresentation claim based on the
Restatement (Second) ofTorts § 552.71 But, as we have already discussed, the
COA has abandoned this claim on appeal.
To establish a negligent misrepresentation claim, the plaintiff must prove
that the defendant "'supplie[d] false information for the guidance of others in their
67 Jd at 460.
68 Id,
69 Id
70 Plaintiffs Third Amended Complaint, Clerk's Papers (No. 68127-3) at
715.
71 See Restatement (Second) of Torts § 552(1) (2012) ("One who, in the
course of his business, profession or employment, or in any other transaction in
which he has a pecuniary interest, supplies false information for the guidance of
others in their business transactions, is subject to liability for pecuniary loss
caused to them by their justifiable reliance upon the information, if he fails to
exercise reasonable care or competence in obtaining or communicating the
information.").
19
No. 68127-3-1 (Consolidated with No. 68522-8-l)/20
business transactions.'"72 Failure to disclose information can serve as a basis for
negligent misrepresentation where one party in a business transaction has
information "'necessary to prevent his partial or ambiguous statement of the facts
from being misleading.'"73 Here, the COA asserts that Marx/Okubo reported that
approximately one-third of the LP siding was damaged in 1996. But in 2005,
Marx/Okubo reported that there were only "isolated" areas of damage in the
same siding. Further, Marx/Okubo failed to disclose that the siding was LP
siding and known to be defective. Finally, it alleges that the "monumental
disparity" between the 1996 report and 2005 report led to an inaccurate reserve
study.
The COA fails to point to anything in the summary judgment record to
show the reports were allegedly defective for any reason other than alleged false
statements and failure to disclose information. In short, there is nothing here to
show any professional negligence, as distinct from a negligent misrepresentation.
As far as we can see, neither the statement of the duties nor the scope of
the duties is the same for these two distinct claims. Yet, in discussing these
concepts, the COA argued below that it was damaged by reliance on "Okubo's
negligent reports."74 The COA fails to point to anything in this record to explain
72 ESCA Corp. v. KPMG Peat Marwick. 135 Wn.2d 820, 826, 959 P.2d
651 (1998) (quoting Restatement (Second) of Torts § 552(1) (1977)).
73 Colonial Imports. Inc. v. Carlton Nw.. Inc.. 121 Wn.2d 726, 731, 853
P.2d 913 (1993) (quoting Restatement (Second) of Torts § 551(2)(b) (1977)).
74 Plaintiff's Motion for Partial Summary Judgment, Clerk's Papers (No.
68127-3) at 1093.
20
No. 68127-3-1 (Consolidated with No. 68522-8-l)/21
that these reports are "negligent" because they breach a professional duty owed
rather than a duty not to negligently misrepresent something. Nor can we find in
this record any explanation why the COA is within the scope of the duty owed by
this professional firm for the professional negligence claim.
These are not mere technicalities. To the extent the COA seeks to rely on
Affiliated, where the tort claim appears to have been one for professional
negligence, not negligent misrepresentation, these failings are critical.
Specifically, this case is essentially a case based on negligent misrepresentation,
not professional negligence. Thus, there is no basis to rely on the lead opinion in
Affiliated, a professional negligence case.75 That case is distinguishable.
G.W. Construction Corp. is also distinguishable. There, a subcontractor
sued a building inspector for failing to detect misplaced rebar during its
inspection.76 The first issue was whether the subcontractor's claim sounded in
contract or in tort.77 This court concluded that the subcontractor's claim sounded
only in tort and the tort statute of limitations applied.78 It explained that the
inspector had a "duty to exercise reasonable engineering skill and judgment" in
its performance of its contractual obligation.79 Although this court did not
explicitly discuss the scope of this duty, it was clear that the inspector owed a
75 Affiliated. 170 Wn.2d at 446.
76 G.W. Const. Corp., 70 Wn. App. at 363.
77 id, at 364.
78 Id, at 366.
79!g\
21
No. 68127-3-1 (Consolidated with No. 68522-8-l)/22
duty of care to the subcontractor because they were both parties to the
contract.80
In contrast, Marx/Okubo's contract was with A.F. Evans, not the COA.
Thus, G.W. Construction Corp. does not support the assertion that Marx/Okubo
owed any duty to the COA. It is not helpful.
In sum, the COA failed to meet its burden in establishing that Marx/Okubo
owed any common law duty for professional negligence to it.
EVIDENTIARY RULING
The COA argues that the trial court erred when it denied the COA's motion
to strike Hart's declaration. While admitting that this evidence was not submitted
in support of Marx/Okubo's motion for summary judgment, the COA makes this
argument "to the extent [Marx/Okubo] argues it should be considered in support
of [its] opposition" to the COA's motion for summary judgment.
The declaration is not among the listed items the trial court considered in
granting summary judgment. Because the declaration plays no part in the
decision under review, we decline to address this contention.
SANCTIONS
CR11
Marx/Okubo contends that the trial court abused its discretion when it
denied its request for sanctions under CR 11. Specifically, it asserts that a
number of plaintiffs testified that they did not review or reviewed but did not rely
on Marx/Okubo's property assessment or reserve study. It argues that these
80 ]g\ at 362, 365.
22
No. 68127-3-1 (Consolidated with No. 68522-8-l)/23
plaintiffs knew prior to filing their third amended complaint that they could not
establish the reliance element of their negligent misrepresentation claims. We
disagree.
Under CR 11, a court may impose sanctions if pleadings are filed for an
improper purpose or without a basis in law orfact.81 "The burden is on the
movant to justify the request for sanctions."82
This court reviews the trial court's CR 11 ruling for abuse ofdiscretion.83
"A trial court abuses its discretion when its order is manifestly unreasonable or
based on untenable grounds."84 When a trial courtdenies a party's motion to
impose sanctions, it need not enter findings.85
Washington courts have recognized that CR 11 sanctions can have a
"potential chilling effect."86 Thus, "the trial court should impose sanctions only
when it is patently clear that a claim has absolutely no chance of success."87
81 Biggs v. Vail. 124 Wn.2d 193, 201, 876 P.2d 448 (1994) (citing CR 11).
82Jg\at202.
83 Wash. State Physicians Ins. Exch. & Ass'n v. Fisons Corp., 122 Wn.2d
299, 338, 858 P.2d 1054 (1993).
84 Id at 339.
85 Skimming v. Boxer. 119 Wn. App. 748, 755, 82 P.3d 707 (2004).
86 Bryant v.Joseph Tree. Inc.. 119 Wn.2d 210, 219, 829 P.2d 1099
(1992); see also Skimming, 119 Wn. App. at 755.
87 Skimming, 119Wn. App. at 755.
23
No. 68127-3-1 (Consolidated with No. 68522-8-l)/24
"The fact that a complaint does not prevail on its merits is by no means
dispositive of the question of CR 11 sanctions."88
To establish a negligent misrepresentation claim, a plaintiff must allege
the following:
(1) the defendant supplied information for the guidance of others in
their business transactions that was false, (2) the defendant knew
or should have known that the information was supplied to guide
the plaintiff in his business transactions, (3) the defendant was
negligent in obtaining or communicating the false information, (4)
the plaintiff relied on the false information, (5) the plaintiffs
reliance was reasonable, and (6) the false information proximately
caused the plaintiff damages.[89]
Here, Marx/Okubo argues that the COA's negligent misrepresentation
claim was without a factual basis. It explains that 14 unit owners admitted in their
interrogatory responses that they did not "review or rely" on Marx/Okubo's
property assessment and reserve study. It also contends that 10 unit owners
admitted the same in their depositions.
But Marx/Okubo's interrogatory and deposition questions focused on
whether the unit owners read these reports. The interrogatory questions asked
the unit owners if they had "read the Okubo Report" and if they had "read the
Reserve Study." The questions at the unit owners' depositions often related to
whether the unit owners remembered when they read the reports and ifthey
could recall specific report provisions.
88
Bryant. 119 Wn.2d at 220.
89 Bloor v. Fritz. 143 Wn. App. 718, 734, 180 P.3d 805 (2008) (emphasis
added) (citing Lawyers Title Ins. Corp. v. Baik. 147 Wn.2d 536, 545, 55 P.3d 619
(2002) (citing Restatement (Second) of Torts § 552(1) (1977)).
24
No. 68127-3-1 (Consolidated with No. 68522-8-IJ/25
In the interrogatory questions, Marx/Okubo also asked the unit owners if
they "relied upon information supplied by Marx/Okubo that was false." Almost all
of the responses included in the record show that the unit owners answered "yes"
to this question. Further, the unit owners testified that a Madera West
representative reviewed the public offering statement with them and gave them
copies before they purchased their condominium units. The public offering
statement included Marx/Okubo's reports.
To establish a claim for negligent misrepresentation, a plaintiff must allege
that it relied on false information provided by the defendant.90 Reliance does not
necessarily require that the unit owners read these reports. Though the COA did
not prevail on the merits of its negligent misrepresentation claim, the COA's claim
was grounded in some facts. Thus, the trial court did not abuse its discretion in
denying Marx/Okubo's request for CR 11 sanctions.
Marx/Okubo argues that the unit owners' testimony shows that they did
not "directly rel[y] upon false statements made by Marx/Okubo" because many of
the unit owners testified that they had not read one or both of the reports. It cites
Schaafv. Highfield to support its assertion that its negligent misrepresentation
claim did not have a factual basis.91 But Schaaf does not hold that a plaintiff
90
See Bloor. 143 Wn. App. at 734.
91 Reply Brief of Appellant Marx/Okubo, Ltd. at 11 (citing Schaaf v.
Highfield. 127Wn.2d 17, 30-31, 896 P.2d 665 (1995)).
25
No. 68127-3-1 (Consolidated with No. 68522-8-l)/26
must directly see or read a report in order to rely on it for the purposes of a
negligent misrepresentation claim.92
There, John Schaaf brought a negligent misrepresentation claim against
Paul Olson, a home appraiser.93 He asserted that Olson failed to report thatthe
roof on the home Schaaf bought needed to be repaired.94 The supreme court
concluded that summary dismissal of this claim was proper because Schaaf did
not rely on the appraisal report "at all."95 The court explained that Schaaf knew
that the roof needed to be repaired before he bought the house and he did not
see the appraiser's report until a year after he bought the house.96
In contrast, as discussed above, the COA presented some evidence to
show that the unit owners relied to some extent on Marx/Okubo's reports even
though they did not read them. Thus, this argument is not persuasive.
CR 26(g)
Marx/Okubo next argues that the trial court abused its discretion when it
denied its request for discovery sanctions. It contends that the trial court should
have imposed sanctions because nine unit owners gave misleading or false
responses to interrogatory questions. We disagree.
92 See Schaaf, 127 Wn.2d at 30-31.
93 jd at 20.
94jg\
95 jd, at 30.
96 Id. at 30-31.
26
No. 68127-3-1 (Consolidated with No. 68522-8-l)/27
CR 26(g) is the discovery sanctions rule, and it is "aimed at reducing
delaying tactics, procedural harassment and mounting legal costs."97 This rule
authorizes an award of attorney fees and costs if a party fails to comply with
discovery rules:
Rule 26(g) requires an attorney signing a discovery response to
certify that the attorney has read the response and that after a
reasonable inquiry believes it is (1) consistent with the discovery
rules and is warranted by existing law or a good faith argument for
the extension, modification or reversal of existing law; (2) not
interposed for any improper purpose such as to harass or cause
unnecessary delay or needless increase in the cost of litigation; and
(3) not unreasonable or unduly burdensome or expensive, given
the needs of the case, the discovery already had, the amount in
controversy, and the importance of the issues at stake in the
litigation.[98]
If a court determines that CR 26(g) was violated, the rule requires the imposition
of sanctions.99
This court reviews a trial court's discovery sanctions for abuse of
discretion.100 "'A trial court abuses its discretion when its order is manifestly
97 Fisons. 122Wn.2dat341.
98jg\at343.
99 See CR 26(g) ("If a certification is made in violation of the rule, the
court, upon motion or upon its own initiative, shall impose upon the person who
made the certification, the party on whose behalf the request, response, or
objection is made, or both, an appropriate sanction, which may include an order
to pay the amount of the reasonable expenses incurred because of the violation,
including a reasonable attorney fee.") (emphasis added); see also Clipse v.
State. 61 Wn. App. 94, 99, 808 P.2d 777 (1991) ("Although the nature of the
sanction is a matter of judicial discretion, the rule mandates imposing sanctions if
they are appropriate under the rule.").
100 Maoana v. Hyundai Motor Am.. 167 Wn.2d 570, 582, 220 P.3d 191
(2009).
27
No. 68127-3-1 (Consolidated with No. 68522-8-l)/28
unreasonable or based on untenable grounds.' ..101
"A discretionary decision rests on 'untenable grounds' or is based
on 'untenable reasons' if the trial court relies on unsupported facts
or applies the wrong legal standard; the court's decision is
'manifestly unreasonable' if 'the court, despite applying the correct
legal standard' to the supported facts, adopts a view 'that no
reasonable person would take.'"11021
In Clipse v. State, this court considered whether the "Designation of
Plaintiffs Expert Witnesses" was "inaccurate, misleading, and not reasonable
under the circumstances."103 After comparing the designation with the witnesses'
deposition testimony, this court concluded that the designation was
misleading.104 Contrary to the designation, three ofthe four presumed expert
witnesses testified thatthey were not familiar with the case.105 This court
explained that the misleading disclosures caused "unnecessary expenditures of
time and money."106
Here, Marx/Okubo argues that nine unit owners gave misleading or false
responses to interrogatories when their responses are compared to their
deposition testimony. For five of the nine unit owners, Marx/Okubo focuses on
the interrogatory response that the unit owners' relied on information provided by
101
Id (quoting Fisons. 122 Wn.2d at 339).
102 |g\ at 583 (quoting Maver v. Sto Indus.. Inc.. 156 Wn.2d 677, 684, 132
P.3d 115 (2006)) (quoting State v. Rohrich. 149 Wn.2d 647, 654, 71 P.3d 638
(2003)).
103 61 Wn. App. 94, 99, 808 P.2d 777 (1991).
104ldat102.
105 Id at 99-101.
106 Id. at 102.
28
No. 68127-3-1 (Consolidated with No. 68522-8-l)/29
Marx/Okubo.107 For the remaining four unit owners, Marx/Okubo focuses on their
interrogatory responses regarding whether they read the reports.108 Thus, we
examine this testimony based on these two interrogatory responses.
Testimony Regarding Reliance
In their interrogatory responses, Allan Fuller, Diana Crettol, Jayne Miller,
Jonathan Jones, and Michelle Donaldson testified that they relied on information
supplied by Marx/Okubo that was false. At their depositions, Marx/Okubo's
questioning focused on when and ifthey read Marx/Okubo's reports and the
specific provisions in the report that they relied on. But, as we noted above,
these are different questions than whether the unit owners believed they
generally relied on information provided by Marx/Okubo. Thus, these unit
owners did not provide misleading or false interrogatory responses. They
provided answers to more specific questions during their depositions.
The one exception appears to be Crettol. In her interrogatory response,
she testified that she did not receive a copy of the property assessment or
reserve study, but she did receive a "Replacement Reserve Estimate," which she
107 Brief ofAppellant Marx/Okubo, Ltd. at 22-27; see Clerk's Papers (No.
68522-8) at 580, 589, 621, 650, 678 (One interrogatory stated, "Do you contend
you relied upon information supplied by Marx/Okubo that was false?").
108 Brief ofAppellant Marx/Okubo, Ltd. at 27-33; see Clerk's Papers (No.
68522-8) at 694-95, 708-09, 719-20, 732-33 (One interrogatory stated, "Did you
read the Okubo Report referred to in your Second Amended Complaint prior to
the date identified in your response to Interrogatory No. [8 or 11]?" Another
interrogatory stated, "Did you read the Reserve Study referred to in your Second
Amended Complaint prior to the date identified in your response to Interrogatory
No. [8 or 11]?" Interrogatory No. 8 for some and No. 11 for others provided,
"State the date upon which you acquired an ownership interest in a home in the
Madera West Condominiums.").
29
No. 68127-3-1 (Consolidated with No. 68522-8-l)/30
later discovered was prepared by Phillips Real Estate Services, not Marx/Okubo.
At her deposition, she testified that she relied on the estimate but not the
property assessment or reports. She explained that she must have
misunderstood the interrogatory. Considering this misunderstanding and her
explanation, her testimony remained consistent.
In sum, the trial court did not abuse its discretion in determining that the
interrogatory responses regarding the unit owners' reliance were not misleading
or false.
Testimony Regarding the Reports
In their interrogatory responses, Rosie White and Thomas Fassler testified
that they read both the property assessment and reserve study before taking an
ownership interest in their condominium unit.
At White's deposition, she clarified that she skimmed the reports
sometime after her purchase while she was at home, not in the Madera West
office. As the COA points out, Marx/Okubo was asking White two different
questions. In the interrogatory, Marx/Okubo asked White if she reviewed the
documents before taking an ownership interest in her condominium. At the
deposition, White testified that she read the reports after the "purchase." It is not
clear whether "purchase" meant after she signed the purchase agreement but
before she took ownership. Since Marx/Okubo was asking two different
questions, White's interrogatory response was not misleading or false.
During Fassler's deposition, he testified that he was not able to remember
when he reviewed these reports or details from these reports. But he testified
that he remembered that a sales agent had showed him the reserve study. He
30
No. 68127-3-1 (Consolidated with No. 68522-8-l)/31
also testified that he remembered that the property assessment mentioned
siding. While Fassler could not remember many details about the report, his
deposition testimony showed that he "read" the reports to some extent.
Ryan Fidler testified in his interrogatory response that he read only the
reserve study before taking an ownership interest. During his deposition, he
testified that he did not see the Marx/Okubo reserve study before purchasing his
unit. When asked why his interrogatory response stated that he had read the
reserve study, he explained that he thought the interrogatory was referring to a
reserve study conducted by Madera West, which was posted on a community
board. Considering this misunderstanding, Fidler's testimony remained
consistent.
Finally, Scott Perry testified in his interrogatory response that he only read
the property assessment. During his deposition, he testified that he could not
recall whether he read the property assessment. When asked why his
interrogatory response stated that he read the report, he responded:
A. I thought I did. Maybe I didn't. There have been so many
documents sent out and it's all gobbledegook to be honest with
you. It's a—it's a nightmare lawsuit.
A. I can't recall reading that. I'm sorry I misrepresented that.
A. I probably went though this too quickly. Just aggravated
that I'm in this situation that I'm in right now with people not
following through doing what they're supposed to do. I think that's
probably why Isaid yeah I must have read it.[1091
109 Clerk's Papers (No. 68522-8) at 726, 729.
31
No. 68127-3-1 (Consolidated with No. 68522-8-IJ/32
Perry's deposition testimony is the only example where his testimony directly
contradicts his interrogatory response. But given Perry's confusion regarding the
numerous documents, the trial court did not abuse its discretion when it denied
Marx/Okubo's request for CR 26(g) sanctions for Perry and the other unit owners'
interrogatory responses.
Marx/Okubo argues that the "fact that the certification rule was violated is
so clear from the evidence presented that the trial court must have applied an
incorrect legal standard."110 But under Clipse. which Marx/Okubo cited to
support its request for sanctions, the "standard" or "issue" was whether the
discovery document contained misleading information that led to unnecessary
expenditures of time and money.111 As explained above, the trial court did not
abuse its discretion in determining that the interrogatory responses were not
misleading when compared with the deposition testimony. Thus, this argument is
not persuasive.
Marx/Okubo contends that "counsel nor the judiciary should turn a blind
eye" to false discovery responses "even when sought to be justified by stress,
emotion, or confusion." But looking at the interrogatory responses and the
deposition testimony as a whole, the responses were not misleading or false. In
two instances, there was some confusion about the documents that the
interrogatory referenced, but their testimony was fairly consistent when their
misunderstanding was revealed.
110 Brief of Appellant Marx/Okubo, Ltd. at 36.
111Clipse. 61 Wn.App. at 102.
32
No. 68127-3-1 (Consolidated with No. 68522-8-l)/33
In sum, the trial court did not abuse its discretion in denying Marx/Okubo's
request for CR 26(g) sanctions.
ATTORNEY FEES
Marx/Okubo argues that it is entitled to an award of attorney fees against
the COA. It bases its argument on RCW 4.84.330 and the attorney fees
provision in the contract between A.F. Evans and Marx/Okubo. We hold that
Marx/Okubo is not entitled to an award of its reasonable fees against the COA
based on this contract.
"Under the American rule compensation for attorney fees and costs may
be awarded only if authorized by contract, statute, or a recognized ground in
equity."112 Whether an award offees is authorized is a question of law that this
court reviews de novo.113
With regard to whether a contract provision authorizes attorney fees and
costs, RCW 4.84.330 provides:
In any action on a contract or lease entered into after September
21, 1977, where such contract or lease specifically provides that
attorneys' fees and costs, which are incurred to enforce the
provisions of such contract or lease, shall be awarded to one ofthe
parties, the prevailing party, whether he or she is the party specified
in the contract or lease or not, shall be entitled to reasonable
attorneys' fees in addition to costs and necessary disbursements.
A threshold issue that neither party addresses is whether the COA
is liable for fees based on a contract to which it is not a party.
112 In re Impoundment of Chevrolet Truck. WA License No. A00125A v.
Wash. State Patrol. 148 Wn.2d 145, 160, 60 P.3d 53 (2002).
113 Boouchv-LandoverCorp., 153 Wn. App. 595, 615, 224 P.3d 795
(2009).
33
No. 68127-3-1 (Consolidated with No. 68522-8-l)/34
Marx/Okubo fails to cite any persuasive authority that this attorney fees
provision between it and A.F. Evans applies to the COA. The contractual
provision states:
The substantially prevailing party in any arbitration, or other final
binding dispute proceeding upon which the parties may agree, shall
be entitled to recover from the other party all costs and expenses
incurred by that party in participating in the arbitration, including
reasonable attorneys' fees.1114'
Nothing in the above contractual provision's wording evidences an intent
by the parties to the contract to confer on any third-party the right to fees.
Moreover, Marx/Okubo fails to point to any other contractual provision to support
the conclusion that the COA is an intended beneficiary of the contract containing
this provision for fees.
We also note a point that neither party addresses. The language of the
fee provision refers to "any arbitration, or other final binding dispute proceeding
upon which the parties may agree," not litigation in court.115
Nevertheless, Marx/Okubo asserts that an attorney fees provision in a
contract can be imposed on a person who is not a party to that contract. But
most of the cases Marx/Okubo cites illustrate circumstances where the party
1 ifi
seeking attorney fees under a contract provision was a party to that contract.
114 Clerk's Papers (No. 68522-8) at 131.
115 Ji
116 Brief of Marx/Okubo, Ltd, at 10-11 (citing Eastwood v. Horse Harbor
Found.. Inc.. 170Wn.2d 380,401-02,241 P.3d 1256 (2010V Brown v. Johnson.
109 Wn. App. 56, 58, 34 P.3d 1233 (2001): Edmonds v. John L Scott Real
Estate. Inc.. 87 Wn. App. 834, 855-56, 942 P.2d 1072 (1997); Western Stud
Welding. Inc. v. Omark Indus.. Inc.. 43 Wn. App. 293, 299, 716 P.2d 959 (1986)).
34
No. 68127-3-1 (Consolidated with No. 68522-8-l)/35
The only case that discusses the award of fees where the recovering party was
not a party to a contract is Deep Water Brewing. LLC v. Fairway Resources.
Ltd.117 But that case does not support Marx/Okubo's broad assertion.
There, Division Three concluded that the trial court properly awarded
attorney fees to the Kenagys.118 The Kenagys bought a restaurant with a lake
view from the Ahlquists.119 The Ahlquists had entered into an easement
agreement and a right-of-way agreement with developers to preserve the
restaurant's view.120 These latter agreements contained attorney fees
provisions.121 Division Three explained that the Kenagys were not third party
beneficiaries to the agreements "but nonetheless [could] enforce the agreements
(with attorney fees provisions) as running covenants protecting the view from
their restaurant."122
That is not the case here. There are no running covenants involved in this
case. Rather, Marx/Okubo relies on a provision in an agreement to which the
COA is not a party. There simply is no authority under these circumstances to
impose on the COA the burden of a contractual provision for attorney fees where
117 Id, (citing Deep Water Brewing. LLC v. Fairway Res.. Ltd.. 152 Wn.
App. 229, 215 P.3d 990 (2009)).
118 Deep Water Brewing. 152 Wn. App. at 279.
119 Ji at 241.
120 Jg\ at 239-40.
121 ]g\ at 245-46.
122 Id, at 278.
35
No. 68127-3-1 (Consolidated with No. 68522-8-l)/36
it is neither a party to the contract nor an intended third-party beneficiary of that
contract.
Marx/Okubo avoids the threshold issue that we have discussed and
analyzes instead whether the contract was central to the COA's claims. This is
incorrect. The initial focus should be on whether the attorney fees provision in
this agreement between Marx/Okubo and A.F. Evans extends to the COA.123
Because Marx/Okubo has cited no controlling authority to support its position, we
presume it has found none.124
Even if Marx/Okubo could assert a fees provision against the COA, the
COA's claims in this case were not "on the contract" as required by RCW
4.84.330.
"If an action in tort is based on a contract containing an attorney fee
provision, the prevailing party is entitled to attorney fees."126 An action is "on a
contract" if (1) "the action arose out of the contract," and (2) "ifthe contract is
central to the dispute."126
In Boguch v. Landover Corp., this court held that "[i]f a party alleges
breach of a duty imposed by an external source, such as a statute or the
123 See id.
124 State v.Young. 89 Wn.2d 613, 625, 574 P.2d 1171 (1978).
125 Brown. 109 Wn. App. at 58.
126 Id.
36
No. 68127-3-1 (Consolidated with No. 68522-8-l)/37
common law, the party does not bring an action on the contract, even if the duty
would not exist in the absence ofa contractual relationship."127
There, Boguch brought breach of contract and negligence claims against
real estate brokerage firms and two realtors.128 The trial court concluded that the
realtors were entitled to summary judgment as a matter of law and awarded them
attorney fees and costs.129 On review, this court concluded that the realtors were
not entitled to an award for defending against Boguch's tort claims.130 This court
explained that Boguch's negligence claims were not "on the contract":
A realtor has a common law and a statutory duty to exercise
reasonable care in representing a seller's interest. RCW
18.86.030(1), .040(1), .110. This duty exists regardless of any
contractual provision. The determination of whether [the realtors]
breached this duty does not require examination of the listing
agreement, making the contract ancillary to the dispute. The
contractual relationship may have given rise to the Realtors' duties
to Boguch, but their duties are defined by the common law and by
statute, not by the contract.11311
Thus, this court determined that the trial court erred in awarding fees for
defending the tort claims based on a contractual provision.132
Here, the same conclusion is appropriate. The COA's negligent
misrepresentation and professional negligence claims were not "on the contract."
127 153 Wn. App. 595, 615, 224 P.3d 795 (2009).
128 Jg\ at 601-03.
129 lg\ at 606-07.
130 ]d at 619.
131 Id.
132 Id.
37
No. 68127-3-1 (Consolidated with No. 68522-8-l)/38
While the contractual relationship between Marx/Okubo and A.F. Evans may
have given rise to the claims, these claims were based on common law and
statute, not on the contract. Thus, the trial court properly determined that
Marx/Okubo was not entitled to an award of fees for defending against the COA's
tort claims.
Marx/Okubo argues that Boguch is not consistent with the supreme court's
decision in Eastwood v. Horse Harbor Foundation.133 But Eastwood is
distinguishable from Boguch. In Eastwood, the supreme court determined that
Horse Harbor Foundation had a contractual obligation under a lease and an
independent tort duty to not cause waste.134 The court granted Eastwood's
request for fees because of an attorney fees provision in the lease and a statute
that provided for an award in a waste action.135 The court's award regarding the
tort of waste appears to be based on a statute, not a contract provision.136 Here,
Marx/Okubo does not cite a statute to support its request for attorney fees and
costs. Thus, Boguch controls this case.
Marx/Okubo also contends that Boguch is distinguishable because that
case contained a narrower attorney fees provision than the provision here. While
the provision's language in Boguch may have been narrower, this difference in
133 170 Wn.2d 380, 241 P.3d 1256 (2010)).
134 JcL
135 Jd at 401-02.
136 Jd
38
No. 68127-3-1 (Consolidated with No. 68522-8-l)/39
language does not negate the overarching rule.137 Aparty does not bring an
action "on the contract" if the duty is "imposed by an external source, such as a
statute or the common law."138 Thus, this argument is not helpful.
Finally, Marx/Okubo argues that the doctrine of equitable estoppel
supports its request for attorney fees and costs under the contract provision. But
this argument is not persuasive.
Marx/Okubo cites Townsend v. Quadrant Corp. to support this
argument.139 This case is distinguishable.
There, the supreme court considered whether the children of homeowners
were bound by arbitration clauses that were in the purchase and sale
agreements that their parents entered into.140 The court explained that the
general rule is that "nonsignatories are not bound by arbitration clauses."141 One
exception to this rule is the principle of equitable estoppel.142 "Equitable estoppel
'precludes a party from claiming the benefits of a contract while simultaneously
137 See Boguch, 153 Wn. App. at 607 (explaining that the provision stated,
"[i]n the event either party employs an attorney to enforce any terms of this
Agreement and is successful, the other party agrees to pay reasonable attorneys'
fees.") (alteration in original) (internal quotation marks omitted).
138 jd at 615.
139 Brief of Appellant Marx/Okubo, Ltd. at 12-13 (citing Townsend v.
Quadrant Corp.. 173 Wn.2d 451, 268 P.3d 917 (2012)).
140 Townsend. 173 Wn.2d at 460.
141 id
142 Id. at 461.
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attempting to avoid the burdens that contract imposes.'"143 The court further
explained that "equitable estoppel may require a nonsignatory to arbitrate a claim
if that person, despite never having signed the agreement, 'knowingly exploits'
the contract in which the arbitration agreement is contained."144
The supreme court explained that two of the parents and children's claims
"relat[ed] directly" to the purchase and sale agreement, "including an allegation of
breach of warranty and a request for rescission."145 Because the children were
arguing that they received a benefit from the agreement, the children could not
also avoid the arbitration clause within that agreement.146
In contrast, the COA's claims against Marx/Okubo did not directly relate to
the contract between Marx/Okubo and A.F. Evans Development. The COA did
not assert breach of contract claims against Marx/Okubo; it asserted negligent
misrepresentation and professional negligence claims. Thus, the COA was not
"knowingly exploiting the terms ofthe contract" because it was not basing its tort
claims on the contract.147
Marx/Okubo contends that the COA "relied upon standard of care
warranties contained in Marx/Okubo's contract with [A.F. Evans] to support their
143 Id (internal quotation marks omitted) (quoting Mundi v. Union Sec. Life
Ins. Co.. 555 F.3d 1042, 1045-46 (9th Cir. 2009)).
144 Id (internal quotation marks omitted) (quoting Mundi. 555 F.3d at
1046).
145 Id
146 jd at 462.
147 See id.
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claims against Marx/Okubo." But the COA's reference to the contract's warranty
was not a basis for its tort claims. In the COA's opposition to Marx/Okubo's
motion for summary judgment, it stated:
The only relevant part of the standard terms here, is Okubo's
warranty that "[itwould] perform its services for [Evans] within the
accepted practices and procedures and [would] exercise that
degree of care and skill ordinarily exercised under similar
circumstances by members of its profession." In other words,
Okubo warranted that it would not be negligent in carrying out the
work in its proposal.11481
The COA's response merely shows that Marx/Okubo made a warranty to A.F.
Evans to use reasonable care. This response does not demonstrate that the
COA's claims were grounded in the contract. As discussed above, the COA's
tort claims were based on common law and statutes.
In sum, the doctrine of equitable estoppel does not support Marx/Okubo's
argument.
Finally, Marx/Okubo argues that it is entitled to attorney fees on appeal
because of the attorney fees provision in its contract with A.F. Evans and under
RAP 18.1. Because Marx/Okubo is not entitled to fees under the contract
provision, it is not entitled to fees on appeal.149
148 Clerk's Papers (No. 68522-8) at 908 (alteration in original) (citation
omitted).
149 See, e.g.. Gray v. Bourgette Const.. LLC. 160 Wn. App. 334, 345, 249
P.3d 644 (2011) (granting attorney fees on appeal to a party because the trial
court properly awarded attorney fees to that party).
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We affirm the summary judgment orders and the denial of sanctions and
attorney fees. We also deny fees on appeal.
Ji
WE CONCUR:
1.<°-