Opinion
No. 50580-7-I.
Filed: March 29, 2004. UNPUBLISHED OPINION
Appeal from Superior Court of King County. Docket No. 01-2-00832-3. Judgment or order under review. Date filed: 05/23/2002. Judge signing: Hon. Joan E DuBuque.
Counsel for Appellant(s), Stephen Michael Hansen, Attorney at Law, 950 Pacific Ave Ste 450, Tacoma, WA 98402-4499.
Counsel for Respondent(s), Wesley Norman Jr Edmunds, Gordon Edmunds, Elder PLLC, 1200 112th Ave NE Ste C110, Bellevue, WA 98004-3737.
Grant Kinnear, Attorney at Law, 1200 112th Ave NE Ste C110, Bellevue, WA 98004-3737.
An agreement that violates a statute or municipal ordinance is void, and a court will leave the parties to such an agreement where it finds them. As a King County employee, Carl Anderson violated the King County Code of Ethics when he entered into agreements with the respondents, who were seeking to do business with the County. We affirm the trial court's dismissal of Anderson's counterclaims and its award of summary judgment for the respondents.
FACTS
In 1996, Anderson began working part-time for the Property Services Division of King County. Anderson's duties included preparing requests for proposals to bid on property that the County planned to sell. In April 1998, Anderson became a full-time employee in the Property Services Division.
Beginning in late 1996, Anderson, Ginger Marshall, and Vera Taylor discussed the possibility of forming a partnership to acquire, develop, and operate assisted living facilities. In 1997, Anderson learned through his work with the County that it planned to sell surplus property known as the Washington Center Building. Anderson was the designated project manager responsible for preparing the sale, and he prepared the request for proposal that invited bids on the property.
Anderson realized that the property would be ideal for development as an assisted living facility. He recommended the building to Marshall and Taylor, and the three agreed to make the Washington Center Building their first project. In October 1997, Anderson helped form a Limited Liability Company called `WCB Properties For Affordable Senior Assisted Living and Community Resource Center' (`WCB'). Initially, only Marshall was listed as a member of WCB.
Anderson and Marshall prepared WCB's bid for the property. The County selected WCB as the winning bidder in December 1997. Shortly afterward, Anderson, Marshall, and Taylor memorialized their partnership agreement. WCB and the County executed the purchase and sale agreement for the property in August 1998.
Because WCB needed additional financing to develop the project, it joined with a group of investors to form an entity called `Fairmont Terrace, LLC.' Anderson, Marshall, and Taylor agreed to assign a 50 percent share of the project to the other investors in exchange for the additional financing.
Anderson never disclosed his interest in WCB to his supervisors at the County. The WCB partners all agreed that, until the project was functioning as an assisted living facility, Anderson's role with WCB and his partnership interest should be kept secret from the County, because of his `potential conflict of interest.' For this reason, Anderson's name was not listed as a member in the WCB operating agreement.
Eventually Anderson and Marshall had a falling out. WCB, and Marshall and Taylor as individuals, sued Anderson for a declaration that he had no interest in WCB or Fairmont Terrace. Anderson counterclaimed that he had an interest in the partnership, in WCB, and in Fairmont Terrace. Adding Fairmont Terrace as a counterclaim defendant, Anderson requested both contractual and equitable relief. Anderson also filed a claim of lien against Fairmont Terrace, and he sued to foreclose on the lien. The trial court consolidated the two suits.
WCB, Marshall, Taylor, and Fairmont Terrace won summary judgment against all of Anderson's counterclaims. Fairmont Terrace also won summary judgment against Anderson's lien foreclosure. Anderson appeals the judgment against his counterclaims and the award of attorney fees and costs associated with the judgment on the lien foreclosure claim.
DISCUSSION A. Summary Judgment Against Anderson's Counterclaims
The trial court awarded summary judgment against Anderson's counterclaims on the ground that they derived from agreements that were void for illegality. Anderson argues that the trial court erred in granting summary judgment because there were triable issues of fact regarding the illegality of the agreements and because, as a matter of law, the partnership agreement was severable from any illegality and was therefore enforceable. The usual standard of review applies.
See Wilson v. Steinbach, 98 Wn.2d 434, 437, 656 P.2d 1030 (1982); see also Right-Price Recreation, L.L.C. v. Connells Prairie Cmty. Council, 146 Wn.2d 370, 381-82, 46 P.3d 789 (2002) (citing Young v. Key Pharms., Inc., 112 Wn.2d 216, 225, 770 P.2d 182 (1989)).
1. WCB's Burden to Show Illegality
WCB argued for dismissal of Anderson's claims because they all derived from agreements that violated the King County Employee Code of Ethics. Specifically, WCB argued that when Anderson made these agreements, he breached an Ethics Code provision that prohibited him from being a partner in a company doing business with the County, unless he disclosed that relationship to the County.
Ch. 3.04 King County Code (KCC).
See KCC 3.04.030(A)(8).
WCB showed that Anderson breached the Ethics Code when he made the agreements. First, Anderson admitted in his opposition to WCB's motion for summary judgment that he became a County employee in April 1998. Second, Anderson alleged in his amended answer and counterclaims that by April 1998 he was a partner with Marshall and Taylor in WCB, which was then doing business with the County. Finally, Anderson admitted that he never disclosed his partnership interest in WCB to the County. As a County employee, Anderson was subject to the Ethics Code. Thus, Anderson breached KCC 3.04.030(A)(8).
KCC 3.04.017(D).
WCB also showed that Anderson's breach of the Ethics Code rendered the agreements void. An agreement violating a statute or municipal ordinance is void unless the agreement is neither immoral nor criminal in nature, and the statute or ordinance subjects violators merely to a penalty without more. A Washington court will not enforce an illegal contract, and will leave the parties to the contract where the court finds them.
Sienkiewicz v. Smith, 97 Wn.2d 711, 716, 649 P.2d 112 (1982).
Goldberg v. Sanglier, 96 Wn.2d 874, 879, 639 P.2d 1347, 647 P.2d 489 (1982).
A negligent or willful breach of the Ethics Code is a misdemeanor punishable by a fine and imprisonment. Thus, the Code subjects one who violates it to more than a mere penalty. For this reason, the agreements that Anderson made with the respondents were void.
KCC 3.04.060(A).
WCB thus satisfied its burden to show the absence of a genuine issue of material fact regarding the unenforceability of the agreements.
2. Anderson's Burden to Establish a Genuine Issue
Anderson opposed WCB's motion by arguing that he was not subject to the Ethics Code and that, even if he was subject to the Code, he disclosed his relationship with Marshall and Taylor to his supervisors. But Anderson's argument failed to create a genuine issue of fact. Although Anderson contended that he was a consultant to the County and not an employee, he nevertheless admitted that he became a County employee in April 1998. And although Anderson disclosed to the County that he had a personal relationship with Marshall and Taylor, he never disclosed that he was their partner in the WCB project.
3. Dismissal of Anderson's Claims
Ten of Anderson's eleven claims relied in some part on the existence of an enforceable agreement. Because the agreements at issue were void, the trial court properly dismissed those ten claims.
Anderson's argument that the partnership agreement was enforceable under the doctrine of severability is without merit. The agreement was not remote from or collateral to Anderson's illegal conduct; rather, Anderson's making of the agreement, combined with his failure to disclose it, is what constituted the illegal conduct.
See Brougham v. Swarva, 34 Wn. App. 68, 79-80, 661 P.2d 138 (1983) (stating the doctrine of severability: if the promise sued upon is related to an illegal transaction, but is not illegal in and of itself, recovery should not be denied if the illegal transaction is not relied upon or required, or if the promise sued upon is remote from or collateral to the illegal transaction, or is supported by independent consideration).
In addition, the trial court properly dismissed Anderson's equitable claim for unjust enrichment/quantum meruit. Although courts may allow such a claim despite the general rule that illegal agreements are void, this exception is applicable only when the claimant is justifiably ignorant of the illegality, and when allowing an equitable recovery would not frustrate the policy goal that underlies the general rule of nullity.
See St. John Farms, Inc. v. D.J. Irvin Co., 25 Wn. App. 802, 808-09, 609 P.2d 970 (1980) (court awarded equitable recovery because plaintiffs were reasonably ignorant that their agreement was illegal, and because the statute's purpose of protecting the public would not be furthered by denying recovery).
Red Devil Fireworks Co. v. Siddle, 32 Wn. App. 521, 526-27, 648 P.2d 468 (1982).
Here it would be improper to allow Anderson to pursue an equitable claim because to do so would frustrate the County's explicit policy goal, which is to deter County employees from engaging in financial dealings that conflict with the public trust. We refuse to allow a method of recovery that would make it cheaper for County employees to violate the Ethics Code.
See KCC 3.04.015(A).
The trial court properly granted WCB's motion for summary judgment against all of Anderson's claims.
B. Attorney Fees
The trial court awarded to Fairmont Terrace its attorney fees and costs related to the lien foreclosure claim. Anderson argues that Fairmont Terrace claimed an excessive amount of fees, because the lien foreclosure involved simple legal issues, and because Fairmont Terrace employed two law firms who performed duplicative work.
A trial court has discretion to award attorney fees and costs for the successful defense of a lien foreclosure. The trial court has broad discretion to fix the amount of the award of attorney fees, and the trial court's finding will not be disturbed on appeal absent an abuse of discretion.
Structurals Northwest, Ltd. v. Fifth Park Place, Inc., 33 Wn. App. 710, 718, 658 P.2d 679 (1983).
The record shows that the trial court awarded fees after considering the hourly rates charged, the work performed, and Fairmont Terrace's need to employ two firms in light of the potential conflict of interest between WCB and Fairmont Terrace. The trial court ensured that the fees claimed were related only to the lien foreclosure defense, and that they were not the result of unnecessarily duplicative work.
Anderson's argument does not address any of the trial court's reasons for awarding the fees. Thus, he fails to show that the trial court's award was manifestly unreasonable, or that the court exercised its discretion on untenable grounds or for untenable reasons. Anderson therefore fails to show that the trial court abused its discretion.
We affirm. Fairmont Terrace's request for attorney fees on appeal is granted; the amount of the award shall be determined in the manner prescribed by RAP 18.1.
KENNEDY and COX, JJ., concur.