Opinion
No. 28170-8-II c/w 28744-7-II
Filed: August 12, 2003 UNPUBLISHED OPINION
Appeal from Superior Court of Cowlitz County Docket No: 00-2-00374-0 Judgment or order under review Date filed: 11/05/2001
Counsel for Appellant(s), William Patrick Horton, Attorney At Law, 101 SW Main Street, Suite 700, Portland, OR 97204-3240.
Terrance Jerome Lee, Attorney at Law, 201 NE Park Plaza Dr Ste 222, Vancouver, WA 98684-5877.
Counsel for Respondent(s), Leland G Ripley, Attorney at Law, P.O. Box 1058, Lake Stevens, WA 98258-1058.
Craig W. Weston, Attorney at Law, 1408 16th Ave, P.O. Box 250, Longview, WA 98632-7155.
Robert Costello entered into nonrefundable retainer fee agreements with attorneys Samuel Wardle and Robert Roden for his criminal defense. Roden then obtained payment of the retainer, a total of $50,000, from Costello's aunt and uncle, the Seeleys, who were unaware of the nonrefundable provision. When Costello fired Wardle and Roden two weeks later, the Seeleys requested a refund and, after Roden and Wardle rejected their request, the Seeleys filed this action. The trial court dismissed the case against Roden under CR 12(b)(6), granted summary judgment to Wardle, and denied the Seeleys' motion to amend their complaint against Roden.
The trial court also dismissed the case against Wardle under CR 12(b)(6).
We affirm the dismissal of the original complaint but hold that the trial court erred by denying the Seeleys' motion to amend. Thus, we reverse and remand for trial on the amended complaint.
FACTS
The State charged Robert Costello with murder. He hired Samuel Wardle to defend him, entering into a $25,000 nonrefundable retainer fee agreement, and, according to the parties' contention, entered into a similar agreement with Robert Roden.
Roden then contacted the Seeleys, requesting that they pay the $50,000 retainer fees. Roden said that the $50,000 would probably be sufficient to pay for the two years of legal services necessary to bring Costello's case to conclusion, but that neither he nor Wardle would begin work on the case until the fees were paid. Roden did not tell the Seeleys that the retainer fees were nonrefundable.
The Seeleys paid $50,000 to Roden, who delivered $25,000 to Wardle at Costello's direction. Two weeks later, Costello fired Wardle and Roden, and two months after that, he committed suicide while incarcerated at the Cowlitz County Jail.
The Seeleys filed a creditor's claim against Costello's estate, seeking reimbursement of the retainer fees. In addition, when Roden rejected their request for an accounting and refund of the retainer fees, they brought this action.
In their first complaint against Roden and Wardle, the Seeleys claimed that the attorneys (1) breached fiduciary duties; (2) violated the Consumer Protection Act (CPA) by refusing to provide an accounting; (3) converted the Seeleys' funds; and (4) wrongfully acquired the fees and, thus, under principles of equity, were holding the funds in constructive trust. Both attorneys responded by filing separate CR 12(b)(6) motions to dismiss for failure to state a claim upon which relief can be granted.
The trial court granted Roden's motion and, because it considered matters beyond the pleadings, it granted summary judgment to Wardle under CR 56.
The trial court also awarded $4,000 in attorney fees to Wardle under CR 11 and RCW 4.84.185.
The Seeleys then moved to amend their complaint against Roden to add two new claims and to reiterate two claims alleged in their original complaint. The trial court denied their motion. The Seeleys then brought this appeal, claiming trial court error in: (1) granting Wardle's CR 12(b)6) motion while simultaneously granting his CR 56 motion for summary judgment; (2) granting Wardle's motion for summary judgment; (3) granting Wardle's motion for sanctions; and (4) denying the Seeley's motion to amend their complaint against Roden.
I. Summary Judgment
The Seeleys claim that the trial court erred by granting Wardle summary judgment. They argue as a matter of law that because the trial court concluded that a special partnership existed between Roden and Wardle, Wardle is liable for any of Roden's actions authorized by the partnership. They then argue that the following evidence supports an inference that Wardle authorized Roden to contact the Seeleys: (1) Costello agreed to pay a $25,000 retainer fee to Wardle and separately, but concurrently, entered into the same agreement with Roden; (2) Roden obtained the entire fee amount from the Seeleys and transferred Wardle's share to him; (3) Wardle kept the fee; and (4) Wardle would not have worked without first receiving the retainer fee. But because there was no evidence that Wardle agreed to or even knew that Roden intended to approach the Seeleys, we conclude that the above facts are insufficient to support this inference. .
We review a summary judgment de novo, engaging in the same inquiry as the trial court; we may affirm on any basis the record supports. Int'l Bhd. of Elec. Workers, Local Union No. 46 v. TRIG Elec. Constr. Co., 142 Wn.2d 431, 434-35, 13 P.3d 622 (2000); Redding v. Virginia Mason Med. Ctr., 75 Wn. App. 424, 426, 878 P.2d 483 (1994). Summary judgment is appropriate only if there is no issue of material fact and the moving party is entitled to judgment as a matter of law. CR 56(c).
Under Washington law, a special partner must authorize the acts of another special partner to be held liable for those acts. Swanson v. Webb Tractor Equip. Co., 24 Wn.2d 631, 649, 167 P.2d 146 (1946). And this authority must be found in [1] the actual agreement of the partners, or [2] through implication arising from the nature of the business or the actual or usual manner in which it is conducted by the particular partnership or by similar partnerships in the same locality, or else [3] from a reasonable inference of its necessity or fitness for the successful operation of the particular partnership business.
Swanson, 24 Wn.2d at 649-50.
Wardle, as the party moving for summary judgment, had the burden of clearly demonstrating the absence of any genuine issue of material fact as to whether the partnership authorized Roden to solicit the $50,000. Spurrell v. Bloch, 40 Wn. App. 854, 860, 701 P.2d 529 (1985). To show the lack of authorization, Wardle presented evidence that although he and Roden were co-counsel, he never associated with Roden; at all times he acted independently of Roden regarding Costello's defense; he at no time directed or controlled Roden's representation of Costello; and he did not authorize Roden to contact the Seeleys. Wardle's evidence was sufficient to show lack of authorization. The burden then shifted to the Seeleys to present evidence that would raise an issue of material fact as to the partnership relationship or authorization. Hash v. Children's Orthopedic Hosp. and Med. Ctr., 110 Wn.2d 912, 915, 757 P.2d 507 (1988). But, as we discussed above, the Seeleys presented no factual evidence regarding Wardle's knowledge of Roden's plan to solicit the $50,000 from the Seeleys. Nor, as the dissents points out, is there any showing that Roden and Wardle discussed either the case or how they would obtain payment of their fees. Dissent at 22. Moreover, the dissent's contention that Wardle and Roden `may' have discussed their co-representation and `may' have authorized the contact is mere speculation, lacking support in the record. Dissent at 23. And there is no evidence about the nature of Roden's or Wardle's businesses, or similar partnerships, that would support an implication of authorization or establish that the solicitation was necessary for the successful operation of the special partnership.
The dissent proposes a theory of authorization by ratification. But, as we have mentioned, Wardle's evidence was sufficient to show lack of authorization, which would include post-transaction ratification. And again, the Seeleys failed to present evidence that Wardle ratified Roden's conduct. See Consumers Ins. Co. v. Cimoch, 69 Wn. App. 313, 323, 848 P.2d 763 (1993) (`The acceptance or retention of benefits derived from an agent's unauthorized act does not amount to a ratification of such act if the principal, in accepting such proceeds or benefits, does not have knowledge of all the material facts surrounding the transaction.') (citations omitted).
We share the dissent's concern for the Seeleys' situation but, unfortunately, it is the Seeleys who failed to meet their burden to present evidence to support their claim. To hold that `the incomplete nature' of evidence showing Roden's authority to bind Wardle establishes that Wardle did not bear his burden of showing the absence of a material issue of fact turns the summary judgment standard on its head. Dissent at 22.
Because the Seeleys failed to establish `specific and material facts to support each element' of their prima facie case, the record contains what the dissent describes as `incomplete' evidence. Hiatt v. Walker Chevrolet, Co., 120 Wn.2d 57, 66, 837 P.2d 618 (1992); Dissent at 22. And because at that point the Seeleys had the burden of presenting evidence, the trial court properly granted summary judgment to Wardle.
We recognize that the outcome makes Roden potentially liable for 100 percent of whatever amount the Seeleys' might collect. But, depending on the evidence, Roden, in turn, may have the right to cross claim against Wardle for contribution or similar relief. Central Washington Refrigeration, Inc. v. Barbee, 133 Wn.2d 509, 513, 946 P.2d 760 (1997)
II. CR 12(b)(6) motion
The Seeleys also argue that the trial court erred by granting Wardle's CR 12(b)(6) motion to dismiss and, simultaneously, granting summary judgment to Wardle.
The trial court is to treat a motion to dismiss under CR 12(b)(6) as one for summary judgment when `matters outside the pleading are presented to and not excluded by the court.' CR 12(b). When the trial court considers matters outside the pleadings in a motion to dismiss, its `decision should be reviewed as though it were a motion for summary judgment under CR 56.' Lombardo v. Pierson, 121 Wn.2d 577, 581 n. 2, 852 P.2d 308 (1993). Because the trial court properly granted Wardle summary judgment, the validity of the trial court's order granting Wardle's CR 12(b)(6) motion is moot.
Nonetheless, the dissent posits a hypothetical third party beneficiary theory that, we agree, if pled or even argued, might have supported denial of Wardle's CR 12(b)(6) motion. The trial court properly grants a CR 12(b)(6) motion when there is no set of facts, consistent with the complaint, that would merit relief. Rowe v. Quality Transp. Svcs., 67 Wn. App. 604, 606, 838 P.2d 128 (1992). Here, as the Seeleys did not plead breach of contract, the trial court did not err in failing to consider that theory when ruling on Wardle's CR 12(b)(6) motion.
III. Attorney Fees A. At Summary Judgment
Relying on CR 11 and RCW 4.84.185, the trial court granted Wardle's motion for attorney fees against the Seeleys and their attorney, jointly and severally. The Seeleys appealed the court's order, but their attorney did not.
The Seeleys claim that the trial court erred by awarding attorney fees because it improperly based its decision only on their breach of fiduciary duty claim. They argue that their complaint alleged four different claims, only one of which was breach of fiduciary duty, and that '[t]he totality of the `action' must be objectively frivolous before sanctions can be awarded under either RCW 4.84.185 or CR 11.' Br. of Appellant at 9.
We review a trial court's award of attorney fees under RCW 4.84.185 or CR 11 for an abuse of discretion. Kearney v. Kearney, 95 Wn. App. 405, 416, 974 P.2d 872 (1999); Doe v. Spokane and Inland Empire Blood Bank, 55 Wn. App. 106, 110, 780 P.2d 853 (1989). RCW 4.84.185 does not authorize a court to award sanctions for isolated claims it deems frivolous; rather, the court must `consider the entire action as a whole.' Biggs v. Vail, 119 Wn.2d 129, 136, 830 P.2d 350 (1992) (citation omitted). As the trial court based its award solely on its determination that the breach of fiduciary duty claim was frivolous, the statute did not support the attorney fee award.
But under CR 11, sanctions may be appropriate when some, but not all, of a plaintiff's claims are frivolous. Biggs, 119 Wn.2d at 137. The Seeleys fail to show that the trial court abused its discretion by awarding attorney fees under CR 11 based upon their breach of fiduciary duty claim.
B. On Appeal
Wardle argues that the Seeleys' appeal is frivolous and, thus, he is entitled to attorney fees and compensatory damages under CR 11, RCW 4.84.185, and RAP 18.9. We disagree. An appeal is frivolous when, considering the record in its entirety and resolving all doubts in favor of the appellant, no debatable issues are presented on which reasonable minds might differ; i.e., the appeal is so devoid of merit that no reasonable possibility of reversal exists. Olson v. City of Bellevue, 93 Wn. App. 154, 165, 968 P.2d 894 (1998). Although the Seeleys ultimately fail to show an issue of material fact as to whether Wardle authorized Roden to solicit the $50,000, their argument that authorization should be inferred from Roden transferring Wardle's share of the retainer fee to him is not devoid of merit. Thus, the Seeleys' appeal is not frivolous and we decline to award attorney fees or damages on appeal.
IV. Motion to Amend Complaint
After the trial court granted Roden's CR 12(b)(6) motion and dismissed the Seeleys' complaint against Roden, the Seeleys moved to amend their complaint to state two new claims, namely misrepresentation and an equitable claim they entitled `money had and received.' They also included two claims alleged in their original complaint, namely conversion and violation of the CPA. The trial court denied the motion, ruling that the Seeleys' proposed amendment failed to state a cause of action and, thus, was futile.
'Generally, courts are to freely allow parties to amend their pleadings: `leave shall be freely given when justice so requires,' unless prejudice to the opposing party would result.' Shelton v. Azar, Inc., 90 Wn. App. 923, 928, 954 P.2d 352 (1998) (quoting CR 15(a)). We review a decision to deny a motion to amend for an abuse of discretion. Ino Ino, Inc. v. City of Bellevue, 132 Wn.2d 103, 142, 937 P.2d 154, 943 P.2d 1358 (1997). And '[t]he denial of a motion for leave to amend is not an abuse of discretion if the proposed amendment is futile.' Orwick v. Fox, 65 Wn. App. 71, 89, 828 P.2d 12 (1992).
A. Misrepresentation
The Seeleys argue that their proposed amendment states a cause of action for the tort of misrepresentation arising out of Roden's failure to disclose to the Seeleys that the $50,000 retainer fees were nonrefundable and earned upon receipt. Roden responds that he did not commit the tort of misrepresentation because he did not owe a duty to the Seeleys to speak or disclose.
In evaluating an action for fraud and misrepresentation, the Washington Supreme Court stated that `the duty to speak does sometimes arise when the parties are dealing at arm's length. That duty arises where the facts are peculiarly within the knowledge of one person and could not be readily obtained by the other.' Oates v. Taylor, 31 Wn.2d 898, 904, 199 P.2d 924 (1948).
A reasonable jury could conclude that when Roden solicited the $50,000 from the Seeleys, the nonrefundable provision of the agreement between Costello and the attorneys was peculiarly within Roden's knowledge. Arguably, the Seeleys could not have readily obtained this information. Thus, the trial court erred in finding that the proposed amendment adding a cause of action for misrepresentation was futile.
B. Money Had and Received
The Seeleys further claim that their cause of action for `money had and received,' which they allege is akin to unjust enrichment or quasi-contract, has merit. They argue that (1) Roden represented that the fee `would cover his and a partners [sic] services through resolution of the Costello murder case'; (2) when Costello fired Roden, it became impossible for him to satisfy this condition of his commitment to the Seeleys; and (3) that impossibility of performance is a basis for the `money had and received' claim. Br. of Appellant at 20. They contend that it was unjust for Roden to keep the $50,000 windfall.
The Seeleys' proposed amendment states that `there is evidence to support the theory that it is unjust to allow Roden to keep the money, because he did not earn it.' CP (5/23/02) at 4. And they reference William P. Horton's declaration, which stated that Roden customarily charged $150 an hour; that he spent only 60 hours on Costello's case; and that, in his opinion, Roden earned no more than $9,000 of the $50,000.
But the Seeleys cite no legal authority in their appellate briefs to support their claim under the doctrine of `money had and received' or under a theory of unjust enrichment. See RAP 10.3(a)(5) (Appellants must support their arguments `with citations to legal authority.'). Thus, we do not address the merits of the Seeleys' assignment of error regarding their `money had and received' claim.
The Seeleys cite two cases, neither of which concern the doctrines of `money had and received' or unjust enrichment. Cotton v. Kronenberg concerned a CPA claim and a claim that an attorney breached his fiduciary duty to a client by violating the Rules of Professional Conduct (RPC) 1.8 (prohibiting attorneys from acquiring an ownership, possessory, security or other pecuniary interest adverse to a client unless the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client). 111 Wn. App. 258, 44 P.3d 878 (2002) review denied, 148 Wn.2d 1011 (2003). And Bohn v. Cody concerned an attorney's liability for malpractice to a party that the attorney never represented under the theory that he breached a duty of care owed to the party. 119 Wn.2d 357, 364-67, 832 P.2d 71 (1992).
C. Conversion
The Seeleys argue that their proposed amendment states a cause of action for conversion, but it adds nothing new to their original complaint. As the Seeleys did not appeal the trial court's order dismissing their original complaint against Roden and as they have not provided any new basis to support a conversion claim, the trial court did not abuse its discretion by denying the motion to amend as to the conversion claim.
D. Consumer Protection Act
The Seeleys next argue that their proposed amendment states a cause of action under the CPA. They contend that Roden committed an unfair or deceptive act because he had a duty to disclose to the Seeleys that the retainer fee was nonrefundable and `equity, fairness and good conscience require [such] disclosure.' Br. of Appellant at 16-17. Roden argues that (1) as a matter of law, he had no duty to disclose that the fee was nonrefundable; (2) his conduct did not occur in trade or commerce; and (3) the factual allegations are insufficient as a matter of law to show that he committed an unfair or deceptive act by failing to disclose. Citing Sing v. John L. Scott, Inc., 134 Wn.2d 24, 30, 948 P.2d 816 (1997), Roden claims that `whether a practice is unfair and deceptive is a legal question for the court.' Br. of Respondent Roden at 17.
The Sing holding is not as broad as Roden contends. The court merely noted that `the question of whether a particular conduct gives rise to a CPA violation is reviewable as a question of law.' 134 Wn.2d at 30. And Guijosa v. Wal-Mart Stores, Inc., recognized that `the jury [is] free to determine what could constitute an unfair and deceptive act or practice.' 144 Wn.2d 907, 921, 32 P.3d 250 (2001).
In Blake v. Federal Way Cycle Ctr., we concluded that `the question of whether particular actions rise to the stature of being `unfair' or `deceptive' is reviewable as a question of law.' 40 Wn. App. 302, 309, 698 P.2d 578 (1985). But Guijosa, a later Washington Supreme Court opinion, overrules Blake to the extent that the two cases are inconsistent.
In their proposed amended complaint, the Seeleys amplified their original complaint, adding that Roden `solicited $50,000 from the Seeleys without telling them that the payment would be considered nonrefundable, and earned upon receipt; that this was a material but undisclosed fact; that payment would not have been made had that position been made known to the Seeleys.' CP (5/23/02) at 4.
Thus, the proposed amendments allege a new cause of action under the CPA, avoiding dismissal on the basis that the Seeleys did not appeal the trial court's order granting Roden's CR 12(b)(6) motion to dismiss.
Under the CPA, unfairness and deceptiveness are two related but different concepts, and an act need not satisfy both definitions to be actionable. 1A Kelly Kunsch, Washington Practice Commercial Transactions sec. 46.16 (2002). An act is deceptive if it `has a capacity to deceive a substantial portion of the public.' Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wn.2d 778, 785, 719 P.2d 531 (1986). An act or practice is unfair if (1) . . . the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise whether, in other words, it is within at least the penumbra of some common-law, statutory, or other established concept of unfairness; (2) . . . it is immoral, unethical, oppressive, or unscrupulous; (3) . . . it causes substantial injury to consumers (or competitors or other businessmen).
Magney v. Lincoln Mut. Savings Bank, 34 Wn. App. 45, 57, 659 P.2d 537 (1983) (quoting Fed. Trade Comm'n v. Sperry Hutchinson Co., 405 U.S. 233, 244 n. 5, 92 S.Ct. 898, 31 L.Ed.2d 170 (1972)).
Because the proposed amendment states a cause of action for the tort of misrepresentation, it also places Roden's conduct within the penumbra of a common law concept of unfairness. And a reasonable jury could also find Roden's conduct to be immoral, unethical, oppressive, or unscrupulous.
Finally, by losing $50,000, the Seeleys arguably suffered substantial injury. Thus, the amendment was not futile insofar as establishing the unfairness element of a CPA claim.
The proposed amendment also includes an allegation that the unfair conduct occurred in the course of commerce. Certain entrepreneurial aspects of the practice of law may fall within the CPA's definition of `trade or commerce.' Short v. Demopolis, 103 Wn.2d 52, 60, 691 P.2d 163 (1984). Entrepreneurial aspects include `how the price of legal services is determined, billed, and collected and the way a law firm obtains, retains, and dismisses clients.' Demopolis, 103 Wn.2d at 61; see also Eriks v. Denver, 118 Wn.2d 451, 464, 824 P.2d 1207 (1992). The proposed amendment alleges that Roden committed an unfair act that occurred in the course of entrepreneurial aspects of Roden's practice of law, namely, billing and collecting for representing Costello.
Further, the proposed amendment is sufficient to allege that Roden's actions affected the public interest. [T]he presence of public interest is demonstrated when the proof establishes that (1) the defendant by unfair or deceptive acts or practices in the conduct of trade or commerce has induced the plaintiff to act or refrain from acting; (2) the plaintiff suffers damage brought about by such action or failure to act; and (3) the defendant's deceptive acts or practices have the potential for repetition.
Haner v. Quincy Farm Chem., Inc., 97 Wn.2d 753, 759, 649 P.2d 828 (1982) (quoting Anhold v. Daniels, 94 Wn.2d 40, 46, 614 P.2d 184 (1980)). The proposed amendment here supports a reasonable inference that Roden will repeat his conduct in the course of his legal practice. As in Demopolis, '[t]hese business aspects of the legal profession are legitimate concerns of the public which are properly subject to the CPA.' 103 Wn.2d at 61.
Finally, the proposed amendment adequately alleges injury. It states that the Seeleys would not have agreed to pay the retainer fee had Roden disclosed that it was nonrefundable. Accordingly, the trial court erred in finding that the Seeleys' CPA cause of action was futile.
In summary, we affirm the trial court's orders granting Wardle summary judgment and his request for attorney fees; we deny Wardle attorney fees or damages on appeal; we reverse the trial court's order denying the Seeleys' motion to amend their complaint to claim misrepresentation and a violation of the CPA against Roden; and we remand for further action consistent with this opinion.
A majority of the panel having determined that this opinion will not be printed in the Washington Appellate Reports, but will be filed for public record pursuant to RCW 2.06.040, it is so ordered.
I agree that the Seeleys' claims against Roden must be tried. I disagree that the Seeleys' claims against Wardle should be dismissed. Accordingly, I dissent in part. Robert Roden and Samuel Wardle are Washington attorneys. Each is a sole practitioner with an office in Cowlitz County.
On dates the record does not show, Robert Costello was arrested for first degree murder. He asked Roden to represent him, and Roden asked Wardle to assist.
On April 21 and 22, 1999, Roden spoke on the phone with Nancy Seeley, a relative of Costello who lives in California. Roden asked Nancy if she and her husband Leonard (the `Seeleys') would pay $50,000 toward Costello's anticipated attorney fees. According to Nancy's later declaration, Roden stated that the $50,000 `would probably last for the two years necessary to bring the matter to conclusion' and would have to be paid `before [he] or Wardle would or could start working on the matter.' Roden did not manifest that the money would be non-refundable, `earned upon receipt,' or a loan to Costello. Roden did not prepare, and no one signed, a written fee agreement. The Seeleys paid Roden $50,000, and Roden paid $25,000 to Wardle.
Nancy Seeley is a first cousin of Robert Costello's mother. Clerk's Papers (CP) (1/22/02) at 65.
CP (1/22/02) at 66.
CP (1/22/02) at 66. According to Roden's later deposition, `I believe that . . . Bob Costello's intention was to borrow money from [the Seeleys],' but `I don't know that I discussed that with [the Seeleys].' CP (5/23/02) at 14.
Wardle states that he received and deposited his half of the funds '[o]n or about April 28, 1999.' CP (1/22/02) at 82-83.
On April 22, 1999, Roden appeared in court with Costello. Although the record does not show whether Wardle also appeared, it does show, by Wardle's own statement, that his attorney-client relationship with Costello '[b]egan on April 22, 1999.'
CP (1/22/02) at 81.
On April 26, 1999, Costello was formally charged with first degree murder. Less than two weeks later, on May 7, Costello fired Roden and Wardle. By May 11, 1999, Costello was represented by new counsel, and on July 3, 1999, he committed suicide while still in jail.
In May and again in June, the Seeleys asked Roden for an accounting and refund. Roden declined or did not respond, so in March 2000, the Seeleys filed this suit. During discovery, Roden estimated that he had `spent at least 60 hours working on Mr. Costello's case.' Wardle had `no idea' how much time he had spent, because he had not maintained `hourly time records.'
CP (5/23/02) at 17.
CP (5/23/02) at 15.
CP (1/22/02) at 85.
Seeleys' claim against Roden
The trial court granted Roden's CR 12(b)(6) motion to dismiss. We may affirm such a ruling only if no set of facts would sustain the plaintiff's complaint. Here then, we must consider any set of facts, even if hypothetical, that might support the plaintiff's complaint. This sparse record leaves open the possibility that a trier of fact could find either of at least two sets of facts:
Bravo v. Dolsen Co., 125 Wn.2d 745, 750, 888 P.2d 147 (1995); Haberman v. WPPSS, 109 Wn.2d 107, 120, 744 P.2d 1032, 750 P.2d 254 (1987); Hope v. Larry's Markets, 108 Wn. App. 185, 191, 29 P.3d 1268 (2001).
Bravo, 125 Wn.2d at 750; Halvorson v. Dahl, 89 Wn.2d 673, 674, 574 P.2d 1190 (1978); Havsy v. Flynn, 88 Wn. App. 514, 518, 945 P.2d 221 (1997).
1. On or about April 22, 1999, the Seeleys agreed to pay, and did pay, $50,000 to Roden. They paid in exchange for Roden's promise to them that Roden would defend Costello, so that they were promisees, Roden was promisor, and Costello was third-party beneficiary. Given that Roden said nothing about the $50,000 being nonrefundable or `earned on receipt,' he objectively manifested, and they reasonably understood, that the $50,000 would be refundable if not earned. The Seeleys were not party to the later written fee agreement between Roden and Costello, and they are not bound by its provisions. Roden did not earn the entire $50,000 before he was fired, and he should now be required to refund some or all of it.
See Dwelley v. Chesterfield, 88 Wn.2d 331, 335, 560 P.2d 353 (1977) (`we have long adhered to the objective manifestation theory of contracts'); see also Lynott v. National Union Fire Ins. Co., 123 Wn.2d 678, 684, 871 P.2d 146 (1994); Hall v. Custom Craft Fixtures, Inc., 87 Wn. App. 1, 9, 937 P.2d 1143 (1997); Toyota of Puyallup, Inc. v. Tracy, 63 Wn. App. 346, 349, 818 P.2d 1122 (1991).
See, e.g., Delaney v. Davis, 81 S.W.3d 445, 449 (Tex.App. 2002) (promisee of third party beneficiary contract may recover from promisor if promisor breached and promisee suffered damage); We're Associates, Inc. v. Koehler Sons, Inc., 624 N.Y.S.2d 619, 621 (N.Y.App.Div. 1995) (promisee may sue promisor for breach of third party beneficiary contract); In re Marriage of Smith Maescher, 26 Cal.Rptr.2d 133, 136 (Cal.Ct.App. 1993) (`it is clear the promisee also has a right to enforce the contract'); Stevens v. Stevens, 798 S.W.2d 136, 139 (Ky. 1990) (promisee has standing to sue promisor for breach of third-party beneficiary contract); Restatement (Second) of Contracts sec. 305(1) (`A promise in a contract creates a duty in the promisor to the promisee to perform the promise even though he also has a similar duty to an intended beneficiary').
2. The Seeleys agreed to pay, and did pay, $50,000 to Roden but only in his capacity as a disclosed agent for Costello. The Seeleys paid their money not in exchange for Roden's promise to defend Costello, but rather in exchange for Costello's promise to repay their money; in other words, the Seeleys were not hiring Roden to defend Costello, but instead were merely loaning money to Costello for him to use as he wished. A short time later, Roden and Costello formed a second, separate contract in which Roden agreed to provide legal services, Costello paid Roden $50,000, and Costello agreed that the $50,000 which by now was his money would be nonrefundable. Roden was never a party to any contract with the Seeleys, and their only rights are against Costello.
See Griffiths Sprague Stevedoring Co. v. Bayly, Martin Fay, Inc., 71 Wn.2d 679, 686, 430 P.2d 600 (1967) (`when an agent makes a contract on behalf of a disclosed or partially disclosed principal whom he has power to bind, he does not thereby become liable for his principal's nonperformance'); Havens v. C D Plastics, Inc., 68 Wn. App. 159, 176, 842 P.2d 975 (1992) (`agent acting within the scope of his authority and in contractual matters is not individually liable'), reversed in part on unrelated grounds, 124 Wn.2d 158 (1994); State v. Hanson, 59 Wn. App. 651, 661, 800 P.2d 1124 (1990) (`disclosed agent does not become a party to the contract which he or she negotiates'); Restatement (Second) Agency sec. 320 (`a person making or purporting to make a contract with another as agent for a disclosed principal does not become a party to the contract'); Restatement sec. 328 (`An agent, by making a contract only on behalf of a . . . principal whom he has power so to bind, does not thereby become liable for its nonperformance').
The first set of facts supports the Seeleys' complaint. The second set of facts supports Roden's defense to that complaint. The key issues are whether Roden formed a contract with Seeleys to which he was a party, and, if so, whether that contract (as opposed to some contract to which the Seeleys were not parties) provided that the $50,000 would not be refundable. As far as the present record shows, those issues can be decided either way, and they require a trial. The trial court erred by granting Roden's CR 12(b)(6) motion to dismiss, and also by denying the Seeleys' ensuing motion to amend, so I agree with the majority's reversal of those rulings. Seeleys' claim against Wardle
The Seeleys, of course, must show a contract to which they were parties.
They may not enforce, nor are they bound by, a contract to which they were not parties.
In addition to granting Roden's motion to dismiss under CR 12(b)(6), the trial court granted Wardle's motion for summary judgment under CR 56.
We may affirm that ruling only if Wardle showed `the absence of an issue of material fact,' and the Seeleys failed to respond by showing the presence of such an issue. We must, of course, take the evidence in the light most favorable to the Seeleys.
Young v. Key Pharmaceuticals, Inc., 112 Wn.2d 216, 225, 770 P.2d 182 (1989), review denied, 118 Wn.2d 1023 (1992); Seybold v. Neu, 105 Wn. App. 666, 676, 19 P.3d 1068 (2001); Fisher v. Aldi Tire, Inc., 78 Wn. App. 902, 906, 902 P.2d 166 (1995), review denied, 128 Wn.2d 1025 (1996).
Bishop v. Miche, 137 Wn.2d 518, 523, 973 P.2d 465 (1999); Borden v. City of Olympia, 113 Wn. App. 359, 362, 53 P.3d 1020 (2002), review denied, P.3d (Wash. July 8, 2003); Lewis v. Krussell, 101 Wn. App. 178, 182, 2 P.3d 486, review denied, 142 Wn.2d 1023 (2000).
One key fact is whether Roden had authority to bind Wardle to the contract, if any, that Roden formed with the Seeleys. The method for analyzing such authority is the same for both `general' and `special' partnerships. As the Washington Supreme Court has said:
So far as third persons are concerned, the authority of a partner, whether he be a member of a general partnership or of a special partnership, must be found in the actual agreement of the partners, or through implication arising from the nature of the business or the actual or usual manner in which it is conducted by the particular partnership or by similar partnerships in the same locality, or else from reasonable inference of its necessity or fitness for the successful operation of the particular partnership business.
Swanson v. Webb Tractor Equip. Co., 24 Wn.2d 631, 649-50, 167 P.2d 146 (1946).
The record in this case is conflicting and incomplete. Roden states under oath that even though he and Wardle had `no partnership agreement,' they were `associated for the representation of Robert Costello,' and they `consult[ed] frequently both in person and on the phone.' Wardle states under oath that `the relationship between Mr. Roden and myself . . . was that of co-counsel.' Wardle's counsel states in a letter sent to the Seeleys' counsel that Wardle `was formulating the legal defense strategy and Mr. Roden was involved in doing the `running around' tasks . . . at Mr. Wardle's direction.' Perhaps not consistently, Wardle states that his representation was `separate and apart and independent' from Roden's, and that neither he nor Roden ever directed or controlled the other. The record does not show whether Roden and Wardle discussed the case, or how to secure payment of their fees, before Roden approached the Seeleys; the record does show, however, that Wardle began to represent Costello at virtually the same time (April 22, 1999) as Roden approached the Seeleys.
CP (1/22/02) at 70.
CP (5/23/02) at 17.
CP (1/22/02) at 91.
CP (4/17/02) at 9.
CP (1/22/02) at 90-91.
Given the conflicting and incomplete nature of this evidence, Wardle did not bear his burden of showing the absence of a material issue of fact (i.e., his burden of showing that no trier of fact could find that Roden had authority to bind Wardle when Roden approached the Seeleys). As far as the record shows, Wardle and Roden may have discussed their co-representation of Costello before Roden went to the Seeleys for money, Wardle may have supported and assisted that effort, and Wardle may have expressly or impliedly authorized the resulting contract, if any. In sum, Wardle has not shown that he did not expressly or impliedly authorize Roden to bind him to a contract; he has not borne his initial burden of showing the absence of an issue of material fact; and the majority errs by affirming the trial court's summary judgment.
Even if the record negated an inference that Wardle authorized Roden to act for him before Roden went to the Seeleys (which the record clearly does not do), the record does not negate an inference that Wardle later ratified whatever contract Roden and the Seeleys might have made. Hence, a second key issue of material fact is whether, if Roden did not initially bind Wardle to a contract with the Seeleys, Wardle later ratified that contract by accepting $25,000 of its proceeds. It is undisputed that Wardle received $25,000 to represent Costello. It is undisputed that Wardle formed an attorney-client relationship with Costello on the very day that Roden spoke with the Seeleys. It can reasonably be inferred that Wardle knew the money came from the Seeleys, for he has not denied such knowledge, he and Roden were `co-counsel,' and he is unlikely to have thought the money came from Costello's jail cell. In sum, Wardle has not shown that he did not ratify a contract, if any, between Roden and Seeleys; he has not borne his burden of showing the absence of a material issue of fact; and the majority errs by ruling otherwise.
Riss v. Angel, 131 Wn.2d 612, 636, 934 P.2d 669 (1997) (principal ratifies if, with knowledge, he or she `accept[s] the benefits of the acts, or without inquiry assume[s] an obligation imposed'); Smith v. Hansen, Hansen Johnson, Inc., 63 Wn. App. 355, 369, 818 P.2d 1127 (1991), review denied, 118 Wn.2d 1023 (1992) (ratification occurs if the principal, with knowledge, '(1) receives, accepts, and retains benefits from the contract, (2) remains silent, acquiesces, and fails to repudiate or disaffirm the contract, or (3) otherwise exhibits conduct demonstrating an adoption and recognition of the contract as binding') (quoting Barnes v. Treece, 15 Wn. App. 437, 443, 549 P.2d 1152 (1976), review denied, 118 Wn.2d 1023 (1992)).
For all of the foregoing reasons, I would reverse and remand with respect to both Roden and Wardle.