Erwin v. Cotter Health Centers, 78928-2.

Citation167 P.3d 1112,161 Wn.2d 676
Decision Date20 September 2007
Docket NumberNo. 78928-2.,78928-2.
PartiesCarey D. ERWIN, a single person, and Healthcare Properties, Inc., a Washington corporation, Respondents, v. COTTER HEALTH CENTERS, a foreign corporation, and James F. Cotter, a single person, Petitioners.
CourtUnited States State Supreme Court of Washington

Charles Kenneth Wiggins, Wiggins & Masters PLLC, Bainbridge Island, WA, for Petitioner.

James Stephan Berg, Larson Berg & Perkins, Yakima, WA, for Respondent.

FAIRHURST, J.

¶ 1 Petitioners James F. Cotter and Cotter Health Centers challenge a Court of Appeals decision affirming the award to respondents Carey D. Erwin and Healthcare Properties, Inc., of fees arising from the leasing of several of Cotter's senior health care (SHC) facilities. Cotter argues that Erwin provided real estate broker services to Cotter; that the parties' contractual choice of Washington law is ineffective and California, not Washington law, should govern their dispute; and that under California law Erwin is prohibited from claiming the leasing fees because Erwin was not licensed in California as a real estate broker.1 We agree that Erwin acted as a real estate broker. However, we hold that the parties' contractual choice of Washington law is effective, and that therefore Washington, not California, law governs the agreement. Applying Washington law, we hold that Erwin can maintain a claim for fees arising from the leasing of Cotter's California SHC facilities.

I. FACTUAL AND PROCEDURAL HISTORY
A. Background

¶ 2 Erwin, a Washington resident at all times material hereto, is the sole owner and operator of Healthcare Properties, Inc., a Washington corporation since at least 1996. Erwin has been a licensed Washington real estate broker since 1992.2 Since 1987, Erwin has worked exclusively in the area of SHC facilities.

¶ 3 Cotter, a Texas resident at all times material hereto, is the sole owner and operator of Cotter Health Centers, a California corporation. Cotter for many years has owned SHC facilities and other commercial properties in several states. All of Cotter's Texas and California SHC facilities discussed herein were, regardless of their corporate forms, in fact owned by Cotter and under his complete control.3 Cotter leased these SHC facilities to independent operators.

¶ 4 Cotter leased three of his Texas SHC facilities to Camlu Care Centers, a Texas corporation, for its operation. In 1997, Camlu contracted with Erwin "to help it divest its leasehold interest" in those SHC facilities. Clerk's Papers (CP) at 30, Findings of Fact (FOF) 10. In early 1998, Erwin found a potential buyer, the Ensign Group, for Camlu's leases.

¶ 5 The Ensign Group, a California entity, was very interested in taking over Camlu's leases, but only if lease terms longer than the three years remaining on those leases could be negotiated. Extension and transfer of Camlu's leases required Cotter's involvement, which led to Erwin meeting Cotter later in 1998. Erwin also met Cotter's employee, William Sleeth, who performed property management activities for all of Cotter's SHC facilities.

B. Cotter and Erwin entered into a consulting agreement

¶ 6 During 1997 and 1998, many of Cotter's SHC facilities in Texas and California "were experiencing operational problems" due to "inefficient and irresponsible operators." CP at 31, FOF 18. Cotter "turned to" Erwin, "among others, for assistance" with these problems. Id. On February 9, 1999, Erwin and Cotter "signed a document entitled Consultant Agreement" (hereinafter referred to as Agreement) at Cotter's home in California.4 CP at 31, FOF 19. The Agreement, drafted by Erwin, was consistent with other agreements he had used.

¶ 7 In the Agreement, Cotter granted Erwin a nine month "exclusive engagement to represent and right to sell or lease" designated Cotter SHC facilities. Ex. 8, ¶ 4. Cotter agreed to pay Erwin a "fee" of 14 percent of the first year's annual lease payment for any new operational lease on a designated SHC facility. Ex. 8, ¶¶ 3, 4; see also CP at 33, FOF 32. The Agreement "automatically extended to cover a deferred closing of any business opportunity or Buyer presented" to Cotter during its original nine month term. Ex. 8, ¶ 3. In the event that Cotter canceled the Agreement, Erwin was entitled to an entire fee for any lease of a designated facility made to a "registered buyer" within 36 months following the cancellation.5 Ex. 8, ¶ 21.

¶ 8 The Agreement expressly stated that it applied to properties identified in "Addendum `A,'" Exhibit 8, ¶ 3, and additionally "contemplated that properties could be added." CP at 33, FOF 30; see also Ex. 8, ¶ 18. When Cotter and Erwin signed the Agreement, Addendum A was "not filled in as to any specific properties." CP at 31, FOF 21. However, they and Sleeth, "prior to, during, and immediately after the meeting of February 9, 1999," discussed "the properties which Cotter was interested in working on, which included facilities in Texas, California, Oklahoma, and possibly others." CP at 31, FOF 21. Shortly thereafter, Addendum A was completed, listing several Texas SHC facilities.6 CP at 32, FOF 22. Cotter "later gave the signal," through Sleeth, that Erwin should "move ahead with work on" the four California SHC facilities as well. CP at 33, FOF 31.

C. The fee dispute

¶ 9 After the Agreement was signed, Cotter told Erwin to "deal primarily with" Sleeth "regarding the status of efforts to achieve transfers" of Cotter's interests. CP at 33, FOF 28. Between February 1999, and February 2000, there was "considerable communication" between Erwin and Sleeth and Erwin and the Ensign Group regarding both the Texas and the California SHC facilities.7 CP at 33, FOF 29. Erwin also arranged and attended meetings of Cotter, Sleeth, and the Ensign Group at Cotter's California home during July 1999, at which the Texas and California SHC facilities were discussed. CP at 33, FOF 33.

¶ 10 Prior to the November 1999 expiration of the Agreement's original nine month term, Cotter and the Ensign Group entered business relationships with respect to two of Cotter's Texas SHC facilities and the four California SHC facilities. On August 18, 1999, Cotter and the Ensign Group executed leases on two Texas SHC facilities. Two days later, Cotter's attorney sent the Ensign Group proposed leases for the four California SHC facilities. The California leases "would have been executed on the terms set forth" but for Cotter's inability to deliver the SHC facilities to the Ensign Group "due to certain contingencies, all of which were eventually resolved by Cotter."8 CP at 33, FOF 41.

¶ 11 On March 6, 2000, Cotter's attorney sent Erwin a letter terminating "any agreements or other arrangements" between Cotter and Erwin "as to marketing of properties owned by" Cotter. CP at 35, FOF 42. The attorney also sent a letter to the Ensign Group withdrawing the proposed California leases. Over the course of the next year, Cotter worked to make the four California SHC facilities available for transfer, and simultaneously negotiated with the Ensign Group and other parties regarding leasing those facilities. In February 2001, less than 36 months after the cancellation of the Agreement, Cotter and the Ensign Group executed lease agreements for the four California SHC facilities.

¶ 12 Erwin demanded fees under the Agreement for his services in connection with the Cotter-Ensign Group transactions on the two Texas SHC facilities and the four California SHC facilities. Cotter denied that any fees were owed.

D. Procedural history

¶ 13 In July 2002, Erwin filed suit in Yakima County Superior Court seeking to collect fees from Cotter for the two Texas leases and the four California leases. Subsequently, Cotter filed actions against Erwin in Texas and California seeking to block Erwin's litigation in Washington. The Texas court, without explanation, denied Erwin's motion to stay its proceedings. The California court recognized jurisdiction in Washington pursuant to the Agreement and granted Erwin's motion to stay its proceedings until the Washington litigation was completed.

¶ 14 Following a four day bench trial, the trial court found in favor of Erwin. The court concluded that the Agreement's forum selection clause, choosing the jurisdiction of Washington, and choice-of-law provision, choosing Washington law, were effective. CP at 37-38, Conclusions of Law (COL) 2-4, 9, 10, 13, 14. Applying Washington law, the court concluded that, under the terms of the Agreement, Erwin was entitled to "an entire fee" for the Cotter-Ensign Group leases on the two Texas9 and the four California SHC facilities, plus accrued interest thereon. CP at 40, COL 27-30. The court also awarded Erwin "all attorneys' fees and collection costs" as the prevailing party. CP at 40-41, COL 31-33. The court entered judgment for Erwin in the amount of $287,811.44 (as of Dec. 3, 2004).

¶ 15 On appeal, the Court of Appeals affirmed the trial court and awarded Erwin costs and fees on appeal. Erwin v. Cotter Health Ctrs., Inc., 133 Wash.App. 143, 155, ¶ 35, 135 P.3d 547 (2006). We granted review. Erwin v. Cotter Health Ctrs., Inc., 159 Wash.2d 1011, 154 P.3d 919 (2007).

II. ISSUES
A. Did Erwin act as a real estate broker in providing services to Cotter under the Agreement?
B. Is the parties' contractual choice of Washington law effective?
C. Under the applicable law, can Erwin, a Washington-licensed real estate broker, maintain a claim for fees arising from the leasing of Cotter's California SHC facilities?
III. ANALYSIS

¶ 16 Cotter argues that Erwin cannot recover a fee for his services in connection with the Cotter-Ensign Group leases because, in providing those services, Erwin acted as a real estate broker in California without the requisite California broker's license in contravention of California law. Erwin argues first that he provided services as a consultant, not as a real estate broker. In the...

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