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City of Maple Valley v. Disend

COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION ONE
Feb 11, 2013
NO. 68304-7-I (Wash. Ct. App. Feb. 11, 2013)

Opinion

NO. 68304-7-I

02-11-2013

CITY OF MAPLE VALLEY, a Washington municipal corporation, Appellant, v. BRUCE LAURENCE DISEND and JANE DOE DISEND, his wife, and KENYON DISEND, PLLC, a Washington professional limited liability company, Respondents.


UNPUBLISHED OPINION

Lau, J. — The trial court dismissed the City of Maple Valley's malpractice suit against its former city attorney, Bruce Disend and Kenyon Disend PLLC, on the ground that the suit was barred by the three-year statute of limitations. Under the discovery rule, Maple Valley's claim did not accrue until it knew, or could in the exercise of reasonable diligence have known, the essential facts underlying its cause of action. Because Maple Valley demonstrated no material issues of fact on whether it had constructive knowledge as to those facts, we affirm.

We refer in this opinion to the attorney and the law firm collectively as "Bruce Disend" or "Disend."

FACTS

To pay for improvements to a commercial corridor known as "Four Corners," the City of Maple Valley sought to implement a financing device known as a "special assessment district" (SAD). In 2003, it enacted an ordinance permitting the city council to adopt SADs proposed by the director of public works. Each SAD would "enable the City to recover a pro rata portion of the original costs of public works improvements from property owners which would benefit from the improvements to the City's infrastructure for which they would have been responsible for in the normal course of development," including water drainage systems and street improvements. On November 28, 2005, Maple Valley adopted a site-specific resolution imposing a SAD on 14 Four Corners property owners (Four Corners SAD). The end goal was to recoup public funds allocated to the underlying capital improvement project once construction was complete.

The Four Corners corridor runs along State Route 169 in the city of Maple Valley, between State Route 516 and SE 264th Street.

The 2003 ordinance was drafted by Robert White, who served as Maple Valley's public works director from 2001 to 2004. White testified in a declaration submitted by Kenyon Disend that the 2003 ordinance was nearly identical to a SAD ordinance enacted by the City of Renton. Because the Renton ordinance had never been challenged, White did not believe the 2003 ordinance was controversial.

Bruce Disend served as Maple Valley's city attorney from 1997 until April 2007. No dispute exists that he approved the 2003 ordinance as to form and advised Maple Valley regarding the 2005 resolution establishing the Four Corners SAD. Disend specifically advised Maple Valley that the proposed Four Corners SAD was "quite uncommon, if not unique."

During the proceedings below, Kenyon Disend informed the trial court that Maple Valley was only the second Washington city known to have enacted a special assessment district of the type at issue here.

Between 2006 and 2008, at least three property owners paid preliminary assessments based on notices of estimated lien recorded against their title. In total, Maple Valley collected $410,457.00. It is undisputed that no property owner ever challenged the legality of the Four Corners SAD.

On December 3, 2007, Christy Todd became Maple Valley's new in-house city attorney. Todd first learned about the Four Corners SAD in 2008. In 2010, city public works director Stephen Clark began to finalize the Four Corners SAD by preparing final assessments for each landowner. This process was cumbersome, and Clark decided it should be simplified through a series of amendments to the 2003 ordinance. He drafted the amendments and forwarded them to Todd for her review. While reviewing the proposed amendments, Todd decided that the 2003 ordinance violated state law as expressed in Woodcreek Land Ltd. Partnerships I, II, III, and IV v. City of Puyallup, 69 Wn. App. 1, 847 P.2d 501 (1993) (Division II). She also decided that the Four Corners SAD, which relied on the 2003 ordinance, was "fatally flawed." An attorney associated with Maple Valley's insurer later agreed with Todd's analysis.

Todd served as interim city manager from July 2008 to April 2009. During those months, she did not serve as city attorney.

Premised on Todd's reading of Woodcreek, on February 14, 2011, the Maple Valley city council repealed the 2005 resolution establishing the Four Corners SAD. On March 28, 2011, it also repealed the 2003 ordinance. The City then refunded $410,457.00 to landowners who had paid assessments based on the recorded notices of estimated lien.

Seeking to recover its losses, Maple Valley sued Bruce Disend for malpractice. It filed its complaint on June 7, 2011, more than five years after it adopted the 2005 resolution establishing the Four Corners SAD and more than 18 years after Division Two of this court decided Woodcreek.

Disend claims in his response brief that Maple Valley served its complaint on May 26, 2011. But it points to nothing in the record that verifies this assertion. For purposes of the statute of limitations, therefore, we assume that Maple Valley commenced suit on June 7, 2011, when it filed its complaint.

Disend moved for summary judgment dismissal, arguing that the three-year statute of limitations barred Maple Valley's complaint, and that the City failed to establish proximate cause. Maple Valley moved for partial summary judgment, seeking a ruling on whether the Four Corners SAD violated state law as expressed in Woodcreek. The trial court granted Disend's motion, dismissing the case as time-barred. It then ruled that Maple Valley's motion for partial summary judgment was moot. On appeal, Maple Valley seeks reversal of the trial court's order granting summary judgment and remand for further proceedings on the merits of its malpractice claim.

Given our disposition, we need not address Disend's alternative argument that Maple Valley failed to prove proximate causation.

ANALYSIS

When reviewing an order granting summary judgment, we engage in the same inquiry as the trial court. Wingert v. Yellow Freight Sys., Inc., 146 Wn.2d 841, 847, 50 P.3d 256 (2002). We will affirm a grant of summary judgment when, viewing the facts and reasonable inferences in the light most favorable to the nonmoving party, we determine that no genuine issues of material fact remain and the moving party is entitled to judgment as a matter of law. Jones v. Allstate Ins. Co., 146 Wn.2d 291, 300, 45 P.3d 1068 (2002); CR 56(c). "To defeat summary judgment, [the nonmoving party's] evidence must set forth specific, detailed, and disputed facts; speculation, argumentative assertions, opinions, and conclusory statements will not suffice." Sanders v. Woods, 121 Wn. App. 593, 600, 89 P.3d 312 (2004).

The statute of limitations for legal malpractice is three years. RCW 4.16.080(3); Janicki Logging & Constr. Co. v. Schwabe, Williamson & Wyatt, P.C., 109 Wn. App. 655, 659, 37 P.3d 309 (2001). The limitations period, which operates to prevent stale claims and enables the defendant to preserve evidence, begins to run when a cause of action accrues. Janicki, 109 Wn. App. at 662. Accrual occurs "when the plaintiff has a right to seek relief in the courts." Sabey v. Howard Johnson & Co., 101 Wn. App. 575, 592-93, 5 P.3d 730 (2000). Under the common law discovery rule, an attorney malpractice claim does not accrue "until the client 'discovers, or in the exercise of reasonable diligence should have discovered the facts which give rise to his or her cause of action.'" Janicki, 109 Wn. App. at 659 (quoting Peters v. Simmons, 87 Wn.2d 400, 406, 552 P.2d 1053 (1976)). "A party must exercise reasonable diligence in pursuing a legal claim." Reichelt v. Johns-Manville Corp., 107 Wn.2d 761, 772, 733 P.2d 530 (1987). "If such diligence is not exercised in a timely manner, the cause of action will be barred by the statute of limitations." Reichelt, 107 Wn.2d at 772. The plaintiff bears the burden of proving that all essential facts were not discovered and could not have been discovered by due diligence, more than three years before it commenced the action. G.W. Constr. Corp. v. Prof'l Serv. Indus., Inc., 70 Wn. App. 360, 367, 853 P.2d 484 (1993).

Because Maple Valley filed suit approximately four years after its relationship with Kenyon Disend terminated, it does not contend that the "continuous representation rule" tolled the limitations period. See Janicki, 109 Wn. App. at 661 (explaining that the continuous representation rule "tolls the statute of limitations until the end of an attorney's representation of a client in the same matter in which the alleged malpractice occurred."). The parties agree that the discovery rule provides the only basis for tolling.

The discovery rule does not require knowledge that a specific cause of action exists. Huff v. Roach, 125 Wn. App. 724, 729, 106 P.3d 268 (2005); Richardson v. Denend, 59 Wn. App. 92, 95-96, 795 P.2d 1192 (1990). "Still, the facts supporting each of the essential elements of the cause of action . . . must be known before the statute begins to run." Janicki, 109 Wn. App. at 659-60; see also Cawdrey v. Hanson Baker Ludlow Drumheller, P.S., 129 Wn. App. 810, 818, 120 P.3d 605 (2005) (limitations period begins to run once plaintiff knows "enough facts to file suit"). The elements of a legal malpractice claim are:

(1) The existence of an attorney-client relationship which gives rise to a duty of care on the part of the attorney to the client; (2) an act or omission by the attorney in breach of the duty of care; (3) damage to the client; and (4) proximate causation between the attorney's breach of the duty and the damage incurred.
Hizey v. Carpenter, 119 Wn.2d 251, 260-61, 830 P.2d 646 (1992).

Knowledge may be actual or constructive. Janicki, 109 Wn. App. at 661. "'[O]ne who has notice of facts sufficient to put him upon inquiry is deemed to have notice of all acts which reasonable inquiry would disclose.'" Green v. A.P.C., 136 Wn.2d 87, 96, 960 P.2d 912 (1998) (alteration in original) (quoting Hawkes v. Hoffman, 56 Wash. 120, 126, 105 P. 156 (1909)); see also Ronald E. Mallen & Jeffrey M. Smith, Legal Malpractice § 23:16, at 484 (2008). Thus, we may charge the plaintiff with constructive knowledge of the essential facts if, under an objective standard, reasonable inquiry would disclose those facts. Winbun v. Moore, 143 Wn.2d 206, 228, 18 P.3d 576 (2001); Mallen, supra, § 23:16, at 484-87. Due diligence and constructive knowledge are fact issues that depend on inferences drawn from the circumstances of each case. We may determine these issues as a matter of law only if reasonable minds could reach but one conclusion. Cawdrey, 129 Wn. App. at 818.

To survive summary judgment, Maple Valley must demonstrate that reasonable minds could differ regarding whether it knew, or could in the exercise of reasonable diligence have known, the facts underlying each element of its cause of action more than three years before it filed suit on June 7, 2011. The parties do not dispute the duty element, and Disend does not claim that Maple Valley had actual knowledge. The crux of this appeal, therefore, is whether Maple Valley can be charged with constructive knowledge of the disputed elemental facts more than three years before filing suit.

As discussed in a separate section below, we conclude that "injury" occurred, if at all, when Maple Valley established the Four Corners SAD at the November 28, 2005 city council meeting.

Maple Valley alleges Disend negligently failed to advise the City that the proposed Four Corners SAD violated state law, as expressed in Woodcreek. The material facts underlying that allegation are (1) the existence of Woodcreek, (2) Disend's failure to advise Maple Valley that the proposed Four Corners SAD violated Woodcreek, and (3) Maple Valley's establishment of the Four Corners SAD in reliance on Disend's legal advice.

Disend contends that Maple Valley had constructive knowledge of all essential facts more than three years before commencing suit. Specifically, Disend argues that Maple Valley had constructive knowledge of these facts as early as November 28, 2005, when the city council adopted the site-specific resolution establishing the Four Corners SAD. Maple Valley argues that, on this issue, material fact questions remain precluding summary judgment.

In support of its motion for summary judgment dismissal, Disend submitted the declaration of former city public works director William Guenzler. Guenzler testified that he was approached by city manager John Starbard, who suggested using a SAD to collect assessments. Guenzler knew that other, more traditional, financing options existed, but he decided to give the SAD a try:

Mr. Starbard and I had previously worked together at the City of Bellevue and had experience with the use of Local Improvement Districts (LIDs). Based upon my experience with the difficulties involved in the approval and implementation of LIDs, I was in favor of trying the Special Assessment method at Maple Valley.
. . . . I researched the City of Maple Valley's Code and 'roughed out' draft implementing legislation for a Special Assessment District.
During the drafting process, Guenzler sought advice from Disend. After meeting with Disend, Guenzler understood that the City's proposal was unusual:
I . . . recall discussing the Four Corners Special Assessment District with Attorney Bruce Disend at Kenyon Disend, who was the City Attorney at the time. I recall a meeting where Mr. Disend advised me (and probably City Manager John Starbard) that the Special Assessment District Ordinance was unusual.
But Guenzler continued to advocate for the proposed SAD, believing that further inquiry into its legality was unnecessary:
I did not ask Mr. Disend to conduct a risk assessment of proceeding with the Four Corners Special Assessment District. I was aware that the Special Assessment District could be challenged, but in my experience, any action by government can be challenged. If cities chose not to pursue a course of action due to the risk that it might be challenged, nothing would ever get done.
Yet at the same time, he warned the city council that the proposed SAD was unusual:
I knew during the time that I served as the Public Works Director that the Special Assessment District methodology was unusual. I cautioned the City Council on specific aspects of the Special Assessment District on several occasions and provided written memoranda to that effect.
In one of these memoranda, which was addressed to the mayor and the city council, Guenzler wrote that the proposed SAD might be a legal novelty:
The Community Development and Public Works staff conferred on this issue and have contacted other cities to discern practices for collecting special assessments or triggering the upgrade of non-conforming uses. That research found that Maple Valley's special assessment district ordinance and process is quite uncommon, if not unique. The closest analogy found is a late-comers agreement . . . .
Guenzler repeated this warning at the city council's November 28, 2005 regular business meeting. There, he testified that the proposed SAD was "pretty unusual:"
[W]e did call other cities that have assessment districts and we concluded again that the special assessment district we are using here is a pretty unusual thing. And the closest thing that other jurisdictions that we called had is a latecomer's
agreement where the city is the initial investor and other properties in the area are the latecomers.
He clarified, "It's very normal to pay for your own frontage. It's really quite the exception to have your property adjacent to a project that the city is actually building[;] in fact this is the first time we've really done it this way." Finally, explaining that the mayor had asked him to report on the "legality" of the Four Corners SAD, he reiterated his support for the proposal:
So I think on the legality of it, we've tried very hard to offer you an option that we believe is legal.
. . . . Whether it's good policy, that's for the council members to decide, but, I think we could go and defend ourselves very adequately on any assertion that this is breaking state law . . . . I don't believe that will be the case.
After Guenzler finished speaking, the city council voted 6 to 1 to adopt a resolution establishing the Four Corners SAD.

Disend's deposition testimony confirms that he discussed the novelty of the proposed SAD with Guenzler:

Q [Attorney Robert Gould] Did you caution, counsel to your client, the City of Maple Valley, any concerns that you had about the legality of the '05 resolution before it was adopted by the Maple Valley city council?
A [Bruce Disend] I wasn't concerned about the legality. It was obviously legal. The one thing that I cautioned staff, who in turn passed the information on to the council, is that this was a different mode of carrying out an assessment district and that, you know, the two most common traditionally used financing tools are latecomers and local improvement districts.
And so I said, you know, to the extent that we're using something different, you know, they need to understand that. People might not understand it. It could increase the possibility of somebody raising a challenge, but I wasn't concerned about whether it was valid or not. In my mind it was clearly valid.
Q You communicated that to staff, --
A Correct.
. . . .
Q And to what staff did you allegedly communicate that?
A I didn't allegedly. I did communicate it to Bill Guenzler, the public works director.
Disend's testimony also confirms that he discussed the legality of the proposed SAD with Guenzler:
Q Did you caution Mr. Guenzler concerning any illegality of Exhibit 36, the '05 ordinance?
A No. I do recall when we were discussing this matter we had a discussion about how this was a little bit different than was normally done, and we discussed the possibility of using a traditional latecomers or local improvement district; and neither one would accomplish what he was trying to accomplish in terms of getting reimbursement.
And I said, you know—and I'm sort of paraphrasing at this point—In my mind this was clearly legal. I had explained to him that this was a little bit different. And he says, "Well, is it illegal?" And I said, "I don't think it's illegal, but only a Court gets to rule on whether it's legal or not."

Gould took Disend's deposition on behalf of his client, Maple Valley.

Disend's and Guenzler's undisputed testimony, quoted above, leaves no doubt that Disend advised Guenzler about the novelty and potential invalidity of the proposed SAD. Guenzler, in turn, advised Maple Valley about Disend's same comments. Maple Valley presents no "specific, detailed, and disputed facts" to contradict this evidence. Sanders, 121 Wn. App. at 600. The undisputed record shows that as of November 28, 2005, Maple Valley knew that the Four Corners SAD was an unusual and potentially invalid financing device.

Maple Valley argues that Bruce Disend "admitted in his deposition that he did not advise the City Council about the risks and legalities of the 2003 Ordinance or 2005 Resolution." Appellant's Opening Br. at 6. But that claim ignores the undisputed fact that Disend advised Guenzler of those risks, and Guenzler in turn advised the city council of the same facts.

Maple Valley presents no testimony from the mayor or from any of the city council members or employees present at the November 28, 2005 city council meeting.

Despite this knowledge, Maple Valley declined to seek a formal risk assessment or ask "Bruce Disend, who was the City Attorney for Maple Valley at the time, to conduct a detailed review of the Special Assessment District." These facts establish as a matter of law that Maple Valley's knowledge about the SAD's alleged questionable invalidity was sufficient to prompt the City to exercise reasonable diligence to uncover the factual basis for its cause of action. Mallen, supra, § 23:16, at 484. Maple Valley knowingly implemented an unusual financing device designed to recoup a significant sum of public money. As noted above, Guenzler knew the proposed SAD "could be challenged" and acknowledges he could have asked Kenyon Disend to perform a risk assessment. Maple Valley's 2003 acting public works director, who put together the City's SAD ordinance, also could have requested Disend to conduct a detailed review of the SAD before its implementation. Given the significant public money at stake, the novelty of the proposed SAD, the absence of a formal risk assessment, and the potential for legal challenge, we conclude that a reasonably diligent municipality should have inquired further. Reasonable minds could not differ on the facts of this critical knowledge issue.

No genuine dispute exits that Maple Valley could have discovered Woodcreek and its alleged effect on the Four Corners SAD as of the November 28, 2005 city council meeting, given its knowledge discussed above. "Notice that would lead a diligent party to further inquiry is notice of everything to which such inquiry would lead." Busenius v. Horan, 53 Wn. App. 662, 667, 769 P.2d 869 (1989). Woodcreek was decided more than 12 years before that date. Accordingly, Maple Valley is charged with knowledge of Woodcreek as of November 28, 2005.

Because the known circumstances put Maple Valley on inquiry notice that the Four Corners SAD was unusual and potentially invalid and because further inquiry would have disclosed the Woodcreek case and its alleged affect on the Four Corners SAD, we conclude that Maple Valley had constructive knowledge of the essential facts underlying its cause of action as of November 28, 2005—more than five years before it filed suit. The trial court properly ruled that Maple Valley's claim was time barred.

Maple Valley ignores the factual record pertaining to the 2005 adoption of the Four Corners SAD. Instead, it argues that it could not, in the exercise of reasonable diligence, have discovered the essential facts underlying its cause of action before October 2010, when Todd completed her central analysis of the 2003 ordinance and the 2005 resolution. It claims that it had no reason to examine the Four Corners SAD until after September 17, 2009, when the underlying capital improvement project was sufficiently complete to allow calculation of final assessments under the Four Corners SAD. We are unpersuaded by this argument. The fact that final assessments could not be calculated does not create a genuine fact issue as to whether Maple Valley had actual or constructive knowledge of all essential facts as of November 28, 2005, when it established the Four Corners SAD. Rather, that fact goes to the issue of damages. As explained below, the plaintiff need not know its precise damages to have actual or constructive knowledge of the essential facts underlying its cause of action.
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Injury

Maple Valley also claims that it did not suffer injury—an element of its malpractice claim—until March 2011, just months before filing suit, when it refunded assessments collected under the Four Corners SAD. That claim fails. As Disend correctly explains, "the City's injury (if any) occurred the moment it (allegedly) lost the right to collect the assessments"—on November 28, 2005—when it established the Four Corners SAD. Respondent's Br. at 25. Injury did not occur when the City began writing checks to affected landowners.

Maple Valley confuses "injury" and "damages." The "'injury' element [of a malpractice claim] refers to 'damage,' as opposed to 'damages.'" Huff, 125 Wn. App. at 729. "In the legal malpractice context, injury is the invasion of another's legal interest, while damages are the monetary value of those injuries." Huff, 125 Wn. App. at 729-30; see also Mallen, supra, at 354 ("For evaluating legal malpractice claims . . . injury is the loss or impairment of a right, remedy or interest, or the imposition of a liability."). Injury and damages need not occur simultaneously. Huff, 125 Wn. App. at 730. In fact, injury often occurs "earlier than the date when damages are ascertainable or fully developed." Mallen, supra, § 21:1, at 3.

Here, Maple Valley acknowledges it merely incurred "damages" when it refunded the assessments in 2011. Appellant's Br. at 19 (emphasis added). Although it contends that damages and injury are "inseparable" in this case, it provides no authority or argument to support that claim. See Palmer v. Jensen, 81 Wn. App. 148, 153, 913 P.2d 413 (1996) ("Passing treatment of an issue or lack of reasoned argument is insufficient to merit judicial consideration."). In any event, Maple Valley's claim fails on the merits. As stated above, "injury" is the loss or impairment of a right or interest. Maple Valley suffered injury when it lost the right to collect assessments under the Four Corners SAD. Its subsequent decision to refund the assessments was a response to, or a consequence of, its earlier loss of that right. Mallen, supra, § 23:12, at 374 (when a future event merely discloses the existence of a previous injury, the event "does not 'create' the injury but concerns whether the client should have discovered the injury."); see also Jordache Enters., Inc. v. Brobeck, Phleger & Harrison, 18 Cal. 4th 739, 958 P.2d 1062, 1070 (Cal. 1998) ("'[W]hen malpractice results in the loss of a right, remedy, or interest, or in the imposition of a liability, there has been actual injury regardless of whether future events may affect the permanency of the injury or the amount of monetary damages eventually incurred.'") (alteration in original) (quoting Mallen, supra, § 25:6, at 782). We conclude that Maple Valley's injury, if any, occurred on November 28, 2005.

ATTORNEY FEES

Maple Valley assigns error to the trial court's award of costs to Disend under chapter 4.84 RCW. But the City abandoned this issue when it failed to argue it in its opening brief, and we decline to address it. See Valley View Indus. Park v. City of Redmond, 107 Wn.2d 621, 630, 733 P.2d 182 (1987) ("A party abandons assignments of error to findings of fact if it fails to argue them in its brief.").

CONCLUSION

Because Maple Valley demonstrates no genuine material fact issues as to whether it had actual or constructive knowledge of all essential facts underlying its malpractice claim more than three years before filing suit, the claim is time barred. The trial court properly granted summary judgment dismissal.

Lau , J. WE CONCUR: ________ Cox, J.


Summaries of

City of Maple Valley v. Disend

COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION ONE
Feb 11, 2013
NO. 68304-7-I (Wash. Ct. App. Feb. 11, 2013)
Case details for

City of Maple Valley v. Disend

Case Details

Full title:CITY OF MAPLE VALLEY, a Washington municipal corporation, Appellant, v…

Court:COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION ONE

Date published: Feb 11, 2013

Citations

NO. 68304-7-I (Wash. Ct. App. Feb. 11, 2013)