Angelo Prop. Co. v. Hafiz

• Decision Date: 17 April 2012
• Docket Number: No. 40868–6–II.,40868–6–II.
• Citation: 274 P.3d 1075
• Court: Washington Court of Appeals
• Parties: ANGELO PROPERTY CO., LP, a Washington limited partnership, Respondent, v. Maged HAFIZ, an individual dba The Nile, Appellant.

274 P.3d 1075

ANGELO PROPERTY CO., LP, a Washington limited partnership, Respondent,

v.Maged HAFIZ, an individual dba The Nile, Appellant.

No. 40868–6–II.

Court of Appeals of Washington, Division 2.

April 17, 2012.

Michael Barr King and Justin P. Wade, Carney Badley Spellman PS, Seattle, WA, Benjamin L. Wolff, Attorney at Law, Vancouver, WA, for Appellant.

William Alan Davis, Davis Rothwell Earle & Xochihua, Portland, OR, for Respondent.

HUNT, J.

¶ 1 Abdulhafiz Abdulmaged ¹, doing business as The Nile (collectively Maged), appeals the trial court's (1) attempted retention of statutory unlawful detainer jurisdiction ² over the civil damages and counterclaim components of the parties' dispute below; (2) grant of summary judgment, damages, attorney fees, and costs to Angelo Property Co., LP, from which Maged had leased commercial real estate; and (3) dismissal with prejudice of Maged's constructive eviction counterclaim. Angelo filed an unlawful detainer action to evict Maged; Maged responded by vacating the property and surrendering his keys. He then filed three counterclaims for damages against Angelo, including one for constructive eviction.

¶ 2 On appeal, Maged argues that (1) the trial court lacked subject matter jurisdiction to hear his constructive eviction counterclaim as part of the unlawful detainer action because the counterclaim was not “ ‘based on facts which excuse a tenant's breach’ ” ³; (2) the trial court lacked subject matter jurisdiction to continue hearing the parties' remaining damages and counterclaim disputes in the context of the unlawful detainer action after Maged formally surrendered possession of the property, Maged expressly waived any right to regain possession of the property, and the trial court entered an order that Angelo could re-let the property to another tenant; and (3) the trial court erroneously granted summary judgment to Angelo, both in its unlawful detainer action and on Maged's constructive eviction counterclaim. Maged also disputes several of the trial court's findings of fact and conclusions of law.

¶ 3 At the outset, we note several constraints on the scope of our opinion. ⁴ As we explain in more detail later, we do not address the merits of Maged's constructive eviction counterclaim below because the trial court exceeded the scope of its subject matter jurisdiction when it attempted to consider this counterclaim under its limited statutory authority to hear unlawful detainer actions without first converting the unlawful detainer action into an ordinary civil action. Nor do we address the merits of the issues allegedly before the trial court on summary judgment because the trial court had previously restored all possession rights in the property at issue to Angelo on or before August 15, 2008, when it granted Angelo authority to re-let the property to another tenant. The trial court, thus, had already resolved the “right to possession” and had exhausted its limited statutory authority over unlawful detainer actions. Because thereafter the trial court lacked subject matter jurisdiction to hear any further proceedings under its statutory unlawful detainer authority, it had no power to decide any further issues in this matter. Accordingly, we address only the issues properly before us.

¶ 4 We hold that the trial court exceeded the scope of its subject matter jurisdiction under the unlawful detainer statute when it heard Maged's constructive eviction counterclaim without first converting the unlawful detainer action into an ordinary civil action for damages.⁵ We further hold that, when the trial court resolved the right to possess the property as of August 15, 2008, (1) it erred in contrarily concluding that the issue of “legal possession” to the property was unresolved as of that date; (2) its subject matter jurisdiction over the unlawful detainer proceedings ended; and (3) therefore, it lacked authority to issue any orders, rulings, and factual determinations after August 15, 2008, while purporting to retain statutory unlawful detainer jurisdiction over the case.

¶ 5 Accordingly, we vacate (1) part four of the trial court's August 15, 2008 order, concluding that the “the issue of legal possession to the [property] is not yet resolved” ⁶; and (2) the trial court's other orders, rulings, and factual determinations entered after August 15, 2008, including the trial court's summary judgment order ⁷ and its final order and judgment dated May 14, 2010. We remand to the trial court for further proceedings.

FACTS

I. Lease Agreement

¶ 6 On December 19, 2005, Maged entered into a five-year lease agreement with Angelo to lease Suite 50 of Angelo's Cascade Village Center, a multiple-occupancy commercial complex in Vancouver, Washington. The parties agreed that Maged would open The Nile nightclub on the property and that the lease would take effect 30 days after Maged completed commercial improvements, commencing no later than April 1, 2006. Anticipating that he would operate The Nile for five years under the lease agreement, Maged invested approximately $500,000 in building improvements and business expenses and obtained the necessary operating permits. At some point after April 1, 2006, Maged took possession of the property and formally opened The Nile for business.⁸

¶ 7 On April 14, 2008, Angelo served Maged with a 30–day notice to comply with the lease agreement or to vacate the leased property (notice to quit), (1) listing 13 lease agreement covenants that Angelo alleged Maged had broken; ⁹ and (2) informing Maged that he had 30 days either to cure the alleged lease violations or to vacate the property or he could be found liable for unlawful detainer of the property under chapter 59.12 RCW. According to Angelo, Maged failed to cure the lease violations or to vacate the property within 30 days.

II. Unlawful Detainer Action

¶ 8 On May 30, 2008, Angelo filed a complaint against Maged under RCW 59.12.030(4) and RCW 59.12.030(5), alleging that Maged had continued to violate the lease covenants specified in its notice to quit; that he remained in possession of the property; and, therefore, that he had “unlawfully detain [ed]” the property under chapter 59.12 RCW. Clerk's Papers (CP) at 4. Angelo asked for a writ of restitution of the property, an order terminating Maged's tenancy, double damages for the period that Maged had unlawfully detained the property after May 14 (30 days from the April 14 notice to quit), and reasonable attorney fees under the lease agreement.

¶ 9 On June 17, Maged paid $6,834.95 for his June 2008 rent into the court registry. By June 18, Maged had informed Angelo that he believed Angelo had “unlawfully evict[ed]” him from the property ¹⁰ and that he no longer intended to operate The Nile. CP at 50. Maged then removed everything of value from The Nile, including all appliances, furniture and the liquor inventory. On July 1, he returned his keys to Angelo's property manager, Stacey Sillivan, and relinquished possession of the property. CP at 40, 47–48. According to Sillivan, Maged did not seek to reenter the property after he returned his keys, and he did not pay rent after July 1.

A. Answer; Counterclaim; Motion for Conversion into Ordinary Civil Action

¶ 10 On June 16, 2008, Maged filed an answer, denying that he had failed to comply with the notice to quit or that he held the property in unlawful detainer. On July 15, Maged moved to amend his answer to add three counterclaims: (1) that Angelo had breached the lease agreement because its “action for unlawful detainer constitute[d] an interference with [Maged's] quiet enjoyment of [the] property and constructive eviction,” ¹¹ CP at 40; (2) that Angelo was unjustly enriched by Maged's significant improvements to the property; and (3) that Angelo had intentionally interfered with Maged's business expectancy with his customers and suppliers. Maged attached a declaration that he had “surrendered possession” of the property to Angelo on July 1. CP at 37. Consistent with this declaration, Maged's proposed amended answer did not seek reinstatement in the property.

¶ 11 In his motion to file an amended answer asking to add counterclaims, Maged argued that an unlawful detainer action is a “summary proceeding,” ¹² designed to restore the possession of leased property quickly and expeditiously; that a court normally may not allow a defendant to assert counterclaims or setoffs; and that, under Munden v. Hazelrigg, ¹³ a trial court may “convert” an unlawful detainer action into an ordinary civil action for damages when the right to possession ceases to be at issue at any time between the commencement of the unlawful detainer lawsuit and trial in that action. CP at 36. Because he had already “surrendered” actual possession of the property to Angelo, Maged asserted that possession was “no longer at issue” and that the trial court should convert the proceeding into an ordinary civil action under its general subject matter jurisdiction to hear all of Maged's counterclaims together without forcing him to file a separate lawsuit. CP at 36.

¶ 12 Angelo opposed Maged's motion to bring his counterclaims in a civil damages action under the court's general subject matter jurisdiction and accused Maged of attempting to make an “end-run” around the unlawful detainer statute by contesting the “legal right to possession” in an ordinary civil action. CP at 53 (emphasis omitted). Angelo argued that (1) although Maged had relinquished physical possession of the property when he vacated The Nile, he had “contend[ed that] he still has (or had) a legal right to possession” ¹⁴; and (2) therefore, the trial court was required to keep the proceeding as an unlawful detainer action until it resolved which party had a legal right to possession of the property. But Angelo contradicted itself by also arguing that Maged could not claim that he had a “legal right to possession” because he had “voluntarily abandoned” the leased...