Opinion
Nos. 27233-8-III; 27234-6-III.
December 10, 2009.
Appeals from a judgment of the Superior Court for Walla Walla County, No. 04-2-01055-2, Robert L. Zagelow, J., entered June 30, 2008.
Reversed and remanded by unpublished opinion per Schultheis, C.J., concurred in by Sweeney and Brown, JJ.
Homeowners sued a mobile home dealer under various legal theories arising from water damage and other defects to the mobile home they purchased. The trial court dismissed the majority of the homeowners' claims on summary judgment as time-barred. The trial court also refused to vacate a default judgment in favor of the mobile home dealer in a separate action to foreclose the security interest in the promissory note for the purchase of the mobile home. The homeowners were ultimately permitted to present only one legal claim at trial, which was dismissed.
On appeal, the homeowners contend that the trial court erred in its application of the statutes of limitation, exclusion of evidence, and failure to vacate the default judgment. We agree in large measure. We therefore vacate the judgments entered by the trial court and remand for further proceedings.
FACTS
Because the claims at issue were dismissed upon summary judgment, the facts are set forth in the light most favorable to the homeowners, the nonmoving party. Hertog v. City of Seattle, 138 Wn.2d 265, 275, 979 P.2d 400 (1999).
In 1995, Rancho Villa, Inc., a mobile home dealer, purchased a mobile home from the manufacturer Nashua Homes of Idaho, Inc. Rancho Villa installed the home on a space in its mobile home park and eventually listed it for sale. In 1998, Rancho Villa had a front deck and steps constructed for the unit. In July 2002, Rancho Villa hired Charles Webb of Wood Chuck's Construction Company to remodel the deck to prepare it for sale.
In August 2002, Connie Morse and Jim Feete decided to purchase the home and lease the space from Rancho Villa. The homeowners signed a purchase and sale agreement on August 2, and moved in shortly thereafter. The transaction closed on October 22, at which the homeowners signed a promissory note for the purchase. Prior to closing, however, the homeowners experienced problems with the unit.
The homeowners asserted a claim against Arnold Jones, evidently the sole shareholder of Rancho Villa, claiming an ambiguity in the documents of sale as to whether Mr. Jones sold the home as an individual or on behalf of Rancho Villa. Mr. Jones was ultimately dismissed as an individual. For the purposes of this appeal, Mr. Jones and Rancho Villa are referred to collectively as Rancho Villa unless otherwise stated.
One or both of the parties signed documents and personally participated in the events that occurred. For the purposes of this appeal, the identity of the specific party involved in these events is not material. Thus, Ms. Morse and Mr. Feete are collectively referred to as the homeowners unless otherwise stated.
Almost immediately after they moved in, the homeowners noticed that the interior doors were difficult to close. On September 17, 2002, after rainwater intruded into the home from under the front door, the homeowners asked Rancho and the manufacturer to fix it. The homeowners expressed concern that more extensive damage might be found during the repairs because the home had been unoccupied and it was not known how long the door had been leaking. Rancho Villa eventually had the repairs made. Thereafter, the homeowners noticed no more water coming in from the front door.
On August 15, 2004, the homeowners discovered water underneath the linoleum near the front door when they were doing renovations. The homeowners and the contractor removed a sheet of plywood that was nailed to the front outside threshold in an effort to find the source of the water. It became evident that water had seeped into the particleboard, which was soaked and severely deteriorated. The homeowners complained to Rancho Villa and the manufacturer.
The manufacturer sent a representative to the homeowners' residence who made note of the rotting wood and pervasive water damage. The representative implied that the water damage was caused when the factory-installed rubber watertight decking seal was removed when the deck was added by the dealer. An inspector from the Department of Labor and Industries drew the same conclusion and also noted problems with the roofline as a result of improper setup.
The homeowners filed suit against Rancho Villa on December 30, 2004, asserting statutory claims under (1) RCW 18.27.117 (violations relating to mobile/manufactured homes constituting a violation of chapter 19.86 RCW); (2) chapter 19.86 RCW (state Consumer Protection Act); (3) RCW 46.70.132 (implied warranty on manufactured home sales); (4) RCW 46.70.134 (warranty on mobile home installation pursuant to the Washington Administrative Code); and (5) RCW 46.70.135 (mobile home warranties and inspections). The homeowners also pleaded common law claims for breach of contract, promissory estoppel, and unjust enrichment. The homeowners requested attorney fees under the consumer protection and mobile home warranty statutes as well as under the terms of the parties' written sales contract.
The homeowners moved out in January 2006. They filed an amended complaint in June 2006 after obtaining a report from a private home inspector. The report noted separation of the marriage line at the roof; moisture damage in the interior walls, carpet, and exterior eaves; and deterioration of the subflooring at the entryway "to a point of creating a safety hazard of collapse." Clerk's Papers at 584. The inspector concluded that the home showed obvious water damage, the extent of which could not be determined without removing wall, floor, and ceiling panels. The presence of mold was suspected, presenting a health risk. Repairs were estimated at $84,000. The homeowners' amended complaint alleged additional facts related to the installation and assembly of the home.
In August 2006, Rancho Villa filed a separate action to judicially foreclose its security interest on the promissory note. The homeowners failed to answer, and in September 2006, Rancho Villa obtained an order of default. In October 2006, Rancho Villa obtained a default judgment against the homeowners. The homeowners moved to vacate the judgment. They explained that they provided the complaint to their attorney, who thought the case would be consolidated as a compulsory counterclaim, and by the time counsel read the default papers, it was too late. Although the trial court denied the homeowners' repeated requests to vacate the default judgment, the trial court stayed execution of the judgment.
On August 15, 2006, Rancho Villa brought a motion for partial summary judgment against the homeowners. The trial court ruled that the statute of limitations had expired on the homeowners' consumer protection claim as well as those under chapter 46.70 RCW. It also dismissed Mr. Jones and Mr. Webb from the action.
The homeowners moved for reconsideration. In its letter ruling of January 24, 2007, which was incorporated into the court's May 10 order, the trial court held that the claims under chapter 46.70 RCW were subject to the one-year statute of limitations set forth in RCW 46.70.190. However, the discovery rule for latent defects applied to those claims. 1000 Virginia Ltd. P'ship v. Vertecs Corp., 158 Wn.2d 566, 146 P.3d 423 (2006). Nonetheless, because of the undisputed evidence that the homeowners discovered the water problems at the front door in 2002 and expressed concern that the subflooring might have been damaged, the right to bring that action expired in 2003, before the filing of the lawsuit. Similarly, on the claim of insufficient clamps on the marriage line of the home, the court ruled that the discovery rule did not salvage the action because the problem could have been discovered with reasonable diligence. However, the court held, the electrical problems, water in the ductwork, bowing of the walls, and the mold-like substance on the walls, to the extent they were unrelated to the 2002 problem with the front door, could be litigated as they were discovered after the complaint was filed.
The court concluded that the homeowners could still pursue their claims for common law breach of contract and consumer protection under chapter 19.86 RCW as authorized by RCW 18.27.117, as well as a new claim under the Uniform Commercial Code (UCC), for which the court permitted the homeowners to amend their complaint. However, the trial court limited the facts that the homeowners could present under the other legal theories to the four factual claims — electrical problems, water in the ductwork, bowing of the walls, and the mold-like substance on the walls — that the court deemed unrelated to the 2002 front entry problem. The court also retained the stay on the promissory note action.
In July 2007, the trial court denied another of the homeowners' requests to vacate the default judgment on the note foreclosure case and partially lifted the stay to allow Rancho Villa execution on the home. The court ordered the two cases to be consolidated for trial.
Rancho Villa moved for summary judgment against the homeowners' second amended complaint, seeking to dismiss the homeowners' consumer protection claim under chapter 19.86 RCW as authorized by RCW 18.27.117. The trial court granted the motion and dismissed the claim as time-barred. The trial court ultimately ruled that the only theory upon which the homeowners could try the case was revocation of acceptance under the UCC on the factual issues of electrical problems, moisture in the walls, mold, and bowing of the walls (excluding problems that occurred in 2002).
The parties went to trial on May 6, 2008. The trial court excluded evidence pertaining to the problems with the home arising from the 2002 water invasion. At the end of the homeowners' case, Rancho Villa moved for a directed verdict, which was granted. The trial court awarded attorney fees to Rancho Villa and entered a judgment in its favor. The homeowners separately appeal that judgment and the default judgment in the note foreclosure action. This court consolidated the appeals.
DISCUSSION 1. Claims Dismissed on Summary Judgment
This court reviews a summary judgment de novo, performing the same inquiry as the trial court. Lybbert v. Grant County, 141 Wn.2d 29, 34, 1 P.3d 1124 (2000). If there is no genuine issue of material fact, summary judgment will be granted if the moving party is entitled to judgment as a matter of law. Id.
Some of the court's decisions under review were made on reconsideration. A trial court's decision on a motion for reconsideration is typically reviewed for abuse of discretion. Rivers v. Wash. State Conference of Mason Contractors, 145 Wn.2d 674, 685, 41 P.3d 1175 (2002). The issue here, however, involves the application of a statute of limitation to undisputed facts, which is a question of law and reviewed de novo. Heller v. McClure Sons, Inc., 92 Wn. App. 333, 337, 963 P.2d 923 (1998).
a. Statutory Claims — Ch. 46.70 RCW
RCW 46.70.132, .134, and .135 describe mobile home express and implied warranties. RCW 46.70.190 authorizes a civil action for "[a]ny person who is injured in his business or property by a violation of this chapter . . . to recover the actual damages sustained by him together with the costs of the suit, including a reasonable attorney's fee." The statute further provides that "[a] civil action brought in the superior court pursuant to the provisions of this section must be filed no later than one year following the alleged violation of this chapter." RCW 46.70.190. The one-year limitation in RCW 46.70.190 is applicable to all claims brought under chapter 46.70 RCW. Jindra v. Golden West, 52 Wn. App. 124, 758 P.2d 518 (1988).
The homeowners argue that the one-year statute of limitation is subject to the discovery rule for latent defects in construction contracts enunciated in 1000 Virginia, 158 Wn.2d 566. The trial court agreed. But the trial court held that because the homeowners were aware of the water leakage and were concerned about the extent of the damage at around the same time that they purchased the mobile home, the homeowners' claims under chapter 46.70 RCW are barred. See 1000 Virginia, 158 Wn.2d at 581 (noting that "a plaintiff cannot ignore notice of possible defects. The discovery rule requires that `when a plaintiff is placed on notice by some appreciable harm occasioned by another's wrongful conduct, the plaintiff must make further diligent inquiry to ascertain the scope of the actual harm. The plaintiff is charged with what a reasonable inquiry would have discovered.'" (quoting Green v. A.P.C., 136 Wn.2d 87, 96, 960 P.2d 912 (1998)).
On appeal, the homeowners only argue that the discovery rule applies, which the trial court found. They do not argue that the trial court incorrectly ordered summary judgment because the defects could not be detected by the reasonable exercise of diligence. We tend to agree with the trial court's conclusion. But because the homeowners do not provide a thorough reasoned argument in this regard, we decline to review this contention further. Spokane Research Defense Fund v. W. Cent. Cmty. Dev. Ass'n, 133 Wn. App. 602, 606, 137 P.3d 120 (2006). Thus, we do not decide whether to apply the discovery rule to this statutory claim.
b. Consumer Protection Act
The homeowners assert that the trial court should have applied the four-year statute of limitations for their consumer protection claim under chapter 19.86 RCW, which is authorized by the mobile home installation and warranty statute, RCW 18.27.117. Instead, the court applied a one-year statute of limitations under chapter 46.70 RCW.
In a section of chapter 18.27 RCW, which deals with the registration of building contractors, RCW 18.27.117 relates to the installation of mobile homes. That statute relevantly provides that a violation of the state Consumer Protection Act occurs when there is a health and safety risk or a hindrance of the use and enjoyment of a manufactured home (1) due to improper installation by a contractor registered under chapter 18.27 RCW or a mobile home dealer licensed under chapter 46.70 RCW, or (2) the failure to fulfill a warranty identified in chapter 46.70 RCW. RCW 18.27.117. Rancho Villa argues that the statute's reference to chapter 46.70 RCW invokes the one-year statute of limitations set forth in RCW 46.70.190. We disagree.
There is no statute of limitations in chapter 18.27 RCW. The four-year Consumer Protection Act statute of limitations applies. RCW 19.86.120; Kittilson v. Ford, 23 Wn. App. 402, 408, 595 P.2d 944 (1979), aff'd, 93 Wn.2d 223, 608 P.2d 264 (1980).
The court erred in applying the one-year statute of limitations to the consumer protection claim.
c. Implied Warranty of Habitability
The homeowners argue that their claim for the implied warranty of habitability was wrongly dismissed. Rancho Villa argues that the warranty of habitability claim was stricken because it was raised for the first time on the day of trial and the homeowners failed to submit an instruction on it. But the record suggests that the court ruled that it would not permit a warranty of habitability claim simply because it limited the homeowners' legal theory to revocation of acceptance under the UCC.
"To prove a cause of action for breach of the implied warranty of habitability, a plaintiff must show he was the first purchaser-occupant of the dwelling, he bought it from the builder, and the alleged defect rendered the dwelling unfit for occupancy." Vigil v. Spokane County, 42 Wn. App. 796, 800, 714 P.2d 692 (1986) (citing Klos v. Gockel, 87 Wn.2d 567, 569-70, 554 P.2d 1349 (1976)). The court did not reach the issue of whether the elements were met.
The three-year statute of limitations set forth in RCW 4.16.080(2) for the injury to personal property applies to implied warranty of habitability claims. Will v. Frontier Contractors, Inc., 121 Wn. App. 119, 124, 89 P.3d 242 (2004) (citing Stuart v. Coldwell Banker Commercial Group, Inc., 109 Wn.2d 406, 415, 745 P.2d 1284 (1987); Vigil, 42 Wn. App. at 799-800).
Here, the homeowners became aware of the water problem in September 2002. They filed suit in December 2004. Their claim was timely.
d. Negligence, Promissory Estoppel, Unjust Enrichment
Rancho Villa correctly states that the promissory estoppel claim was dismissed on summary judgment because the homeowners did not refute Mr. Jones' factual assertions to the effect that the transaction was handled through the corporation rather than through Mr. Jones personally. The homeowners do not provide argument or citation to the record to support their claim that this ruling was incorrect.
Similarly, the homeowners give the unjust enrichment and negligence issues only passing treatment. These claims cannot be addressed on appeal. RAP 10.3(a)(6); see also Timson v. Pierce County Fire Dist. No. 15, 136 Wn. App. 376, 385, 149 P.3d 427 (2006) (refusing to review an issue that is given only passing treatment) (citing State v. Thomas, 150 Wn.2d 821, 868-69, 83 P.3d 970 (2004)). No error can be discerned from the record or briefing.
2. Excluded Evidence
The homeowners contend that the trial court erred in permitting evidence of only four factual issues. We agree.
The decision to exclude evidence is generally within the trial court's discretion, and we will reverse a trial court's evidentiary ruling only for abuse of discretion. Kappelman v. Lutz, 167 Wn.2d 1, 6, 217 P.3d 286 (2009). A trial court abuses its discretion when its decision is based upon untenable grounds or made for untenable reasons. Id.
Apparently, when the trial court limited the homeowners' claims under chapter 46.70 RCW to those discovered after the complaint was filed, the court similarly, but mistakenly, limited the facts the homeowners could present under other legal theories. The provisions of chapter 46.70 RCW are cumulative, not exclusive. RCW 46.70.270. "Thus, the act provides another basis for bringing the negligence, fraud, products liability, etc., claims arising from vehicle sales that could be brought under the common law or other statutes ( e.g., the consumer protection act, RCW 19.86)." Jindra, 52 Wn. App. at 128.
The events that are the subject of the homeowners' claims began in August 2002. The homeowners filed suit in December 2004. The homeowners are entitled to raise any facts that are temporally embraced by the statute of limitations on the legal theories it advances. The homeowners are permitted to retry the UCC theory with the excluded evidence as well as the consumer protection claim and any theories that they abandoned in light of the court's evidentiary ruling, including contract theories not otherwise addressed in this opinion.
3. Default Judgment on Promissory Note
The homeowners assert that the trial court erred by failing to vacate the default. But, as Rancho Villa points out, the court consolidated the matters for trial. When the homeowners were unsuccessful at trial, the default became a moot issue for the trial court.
CR 60(b)(1) permits the trial court to "relieve a party or his legal representative from a final judgment" owing to "[m]istakes, inadvertence, surprise, excusable neglect or irregularity in obtaining a judgment." A trial court's decision on a motion to set aside a default judgment is reviewed for abuse of discretion. Little v. King, 160 Wn.2d 696, 702, 161 P.3d 345 (2007).
Default judgments are disfavored because "`[i]t is the policy of the law that controversies be determined on the merits rather than by default.'" Id. at 703 (alteration in original) (internal quotation marks omitted) (quoting Griggs v. Averback Realty, Inc., 92 Wn.2d 576, 581, 599 P.2d 1289 (1979)). On the other hand, the courts "value an organized, responsive, and responsible judicial system where litigants acknowledge the jurisdiction of the court to decide their cases and comply with court rules." Id. These competing policies are balanced by applying the fundamental principle of "`whether or not justice is being done.'" Id. (internal quotation marks omitted) (quoting Griggs, 92 Wn.2d at 582). The flexibility of the principle is an acknowledgment that "`[w]hat is just and proper must be determined by the facts of each case, not by a hard and fast rule applicable to all situations regardless of the outcome.'" Id. (alteration in original) (internal quotation marks omitted) (quoting Griggs, 92 Wn.2d at 582).
When deciding to set aside a default judgment, we are guided by four factors:
(1) that there is substantial evidence supporting a prima facia defense; (2) that the failure to timely appear and answer was due to mistake, inadvertence, surprise, or excusable neglect; (3) that the defendant acted with due diligence after notice of the default judgment; and (4) that the plaintiff will not suffer a substantial hardship if the default judgment is vacated.
Id. at 703-04.
The first two factors are primary and the last two are secondary. Nonetheless, because we adhere to the fundamental principle of doing justice, "[t]his is not a mechanical test; whether or not a default judgment should be set aside is a matter of equity." Id. at 704.
The homeowners argue that if their UCC or contract theories are accepted at trial, they will be relieved of the obligation. They point out that they promptly provided the default materials to their attorney, but the attorney mistakenly believed it was a counterclaim, which he did not immediately address until it was too late. Counsel found out about the default on November 6, 2006 and immediately contacted opposing counsel. The motion to vacate was filed on November 20 and heard for the first time on December 6. Rancho Villa does not claim a substantial hardship and none can be discerned from the record.
The homeowners further point out that the promissory note action is a compulsory counterclaim. We agree.
The criteria for a compulsory counterclaim are that the claim must arise from the same transaction or occurrence, must not require parties over whom the court may not assert jurisdiction, must not be the subject of a pending action, and must lie against an opposing party. CR 13(a). Here, there is the required "logical relationship" between the note and the mobile home. Schoeman v. N.Y. Life Ins. Co., 106 Wn.2d 855, 865, 726 P.2d 1 (1986). The claim involves the same parties, there are no additional parties, and there is no other action pending. The note was due when Rancho Villa filed the default action in August 2006.
The court rule relevantly provides, "A pleading shall state as a counterclaim any claim which at the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction. But the pleader need not state the claim if (1) at the time the action was commenced the claim was the subject of another pending action." CR 13(a).
"If a party does not assert a compulsory counterclaim, that party is barred from asserting that claim as an independent claim or as a counterclaim in any other action." Krikava v. Webber, 43 Wn. App. 217, 219, 716 P.2d 916 (1986). The court abused its discretion when it failed to vacate the default.
4. Attorney Fees
Both parties seek attorney fees on appeal under the contract. RCW 4.84.330 provides for an award of attorney fees to a prevailing party in an action on a contract. Because Rancho Villa is not the prevailing party, it will not be entitled to fees on appeal. The homeowners request fees for the first time in their reply brief. The request is untimely. RAP 18.1(b). They are not entitled to fees on appeal. See Cowiche Canyon Conservancy v. Bosley, 118 Wn.2d 801, 809, 828 P.2d 549 (1992) (holding that an issue raised for the first time in a reply brief does not warrant consideration).
CONCLUSION
We vacate the judgment on the homeowners' claims as well as the default judgment in the note foreclosure action and remand for further proceedings.
A majority of the panel has determined that this opinion will not be printed in the Washington Appellate Reports but it will be filed for public record pursuant to RCW 2.06.040.
SWEENEY, J. and BROWN, J., concur.