Erwin v. Cotter Health Centers, Inc.

• Decision Date: 25 May 2006
• Docket Number: No. 23658-7-III.,23658-7-III.
• Citation: 135 P.3d 547,133 Wn. App. 143
• Court: Washington Court of Appeals
• Parties: Carey D. ERWIN, a single person, and Healthcare Properties, Inc., a Washington corporation, Respondents, v. COTTER HEALTH CENTERS, INC., a foreign corporation, and James F. Cotter, a single person, Appellants.

135 P.3d 547

133 Wn. App. 143

Carey D. ERWIN, a single person, and Healthcare Properties, Inc., a Washington corporation, Respondents, v. COTTER HEALTH CENTERS, INC., a foreign corporation, and James F. Cotter, a single person, Appellants.

No. 23658-7-III.

Court of Appeals of Washington, Division 3.

May 25, 2006.

COPYRIGHT MATERIAL OMITTED

James E. Montgomery, Law Offices of James E. Montgomery, Jr., San Antonio, TX, Charles Kenneth Wiggins, Wiggins & Masters PLLC, Bainbridge Island, WA, for Appellants.

James Stephan Berg, James S. Berg PLLC, Yakima, WA, for Respondents.

SWEENEY, C.J.

¶ 1 We are asked here to review a forum selection clause in a multi-state contract under which a Washington resident, Carey D. Erwin, arranged the lease of several nursing homes in California and Texas for a California corporation owned by James F. Cotter. The contract specified that any disputes would be resolved under Washington law. Erwin sued Cotter in Washington to collect his commission, and the trial judge upheld the forum selection clause over Cotter's objection. We conclude this was a proper exercise of the trial court's discretion, well supported by the record and the law, and we affirm.

FACTS

¶ 2 This case was decided by a trial judge following a four-day bench trial, based on the following facts.

BACKGROUND

¶ 3 Cary D. Erwin lives and does business in Washington state where he has been a licensed real estate broker since 1992. He is the sole proprietor of Healthcare Properties, Inc. Since 1987, Erwin has been a consultant in the highly specialized field of health care facilities for seniors. This specialty requires fluency in pertinent government regulations and procedures as well as an understanding of the commercial and legal implications and practices attendant in the sale and lease of health care facilities. Erwin had developed a network of contacts in the health care industry nationwide. He represented clients on both sides of real estate transactions including sales and leases of health care facilities across the country.

¶ 4 James F. Cotter lives in Texas. He is a licensed contractor in California, where he once lived. His company, Cotter Health Centers, Inc., is a California corporation. Through his corporation, Cotter owns health care facilities in California, Texas, and Washington. He personally owns nursing homes in Texas and California. The operations for Cotter's health care facilities were structured largely for convenience in licensing, regulation, tax, and liability exposure. The properties were in fact the property of Cotter and under his complete control.

¶ 5 In 1997, Camlu Care Centers, Inc., a Texas corporation, was leasing and operating three Cotter facilities in Texas. Cotter consulted Erwin to help divest Camlu of its leasehold interest.

¶ 6 Erwin and Cotter signed a consultant agreement. Through Healthcare Properties, Erwin provided specialized business services to a select category of clients who operate nursing homes on a regional or national basis. Significantly for this dispute, the services Erwin was to perform under the Cotter agreement were "completely different from regular real estate activity in terms of the properties involved and the interstate range of possible transactions." Clerk's Papers (CP) at 31 (finding of fact 20).

¶ 7 After the consulting agreement was signed, Cotter, Erwin, and William Sleeth (Cotter's comptroller and chief financial officer) discussed plans for Erwin to assist Cotter with properties located in the states of Texas, California, Oklahoma, and possibly others. Erwin confirmed to Cotter in February 1999 that he would begin work on seven specific properties in Texas, including the three Camlu properties. Erwin then went to work arranging for transfers from Camlu in Texas to a West Coast operating company called the Ensign Group. Ensign wanted leases with terms longer than the three years remaining on the Camlu leases. This required considerable research on a regional and national scale. CP at 30 (finding of fact 11). Erwin renegotiated the Camlu leases, which were then transferred to Ensign. Cotter paid Erwin a commission pursuant to the consulting agreement.

¶ 8 The agreement between Cotter and Erwin also anticipated that certain California properties would also be added to the original agreement. So, although the transfer of the Texas properties was the first project, Cotter gave Erwin the go-ahead to work on the transfer of the California properties. These California properties are the subject of this dispute.

THE DISPUTE

¶ 9 On March 6, 2000, an attorney representing Cotter sent Erwin a letter saying that any agreements between Cotter and Erwin were terminated. The attorney also wrote to the Ensign Group, withdrawing the proposed leases and requesting that the leases be destroyed. Cotter and his attorneys then worked on their own to "liberate" the California facilities and make them available for transfer. At the same time, they negotiated with the Ensign Group and other parties for those California properties. The upshot was that, in February 2001, Cotter and his affiliates signed lease agreements with Ensign for four California properties, effective in November 2001.

¶ 10 Erwin demanded a fee for his services. Cotter and his companies refused. Erwin sued in Washington to recover commissions for the leases of two facilities in Texas and four in California. Cotter filed suit in Texas and California to bar Erwin from proceeding in Washington. The California court recognized the parties' choice of law provision and stayed Cotter's action pending the outcome of the Washington litigation. CP at 36 (finding of fact 51). Cotter contends that the dispute should be resolved under California and Texas law and that the contract is illegal under the law of both those states.

THE COURT'S DECISION

¶ 11 The trial court concluded that Cotter's consulting agreement with Erwin was enforceable in Washington and that Cotter submitted to personal jurisdiction in Washington under the written agreement. The contract provided that:

Any dispute regarding the interpretation or enforcement of this Agreement shall by agreement of the parties be resolved in the State of Washington pursuant to its laws as the parties acknowledge that jurisdiction lies therein.

CP at 266. It also provided that:

Should property(ies) that are listed on Addendum "A" be located in a state other than the state of Washington then owner [Cotter] expressly acknowledges that they are not knowingly entering into an agreement which is illegal by contracting with real estate broker which is not licensed in state where facilities are located. In addition Client [Cotter] agrees to waive any such provision that would allow for a contest of fees based on the fact the Consultant [Erwin] is not licensed as a real estate broker in the state where facilities are located.

CP at 266. The agreement goes on to acknowledge that the agreement is not the typical listing agreement with a real estate broker or agent.

¶ 12 The trial court concluded that the contract was not illegal under Washington law. The court found that Erwin did not provide classic real estate brokering. Instead, he performed specialized national facilities marketing consultant services. CP at 31 (finding of fact 20). Accordingly, the court concluded that Erwin was not required to be licensed in every state touched by the transaction. CP at 38 (conclusion of law 11).

¶ 13 The court also found that Erwin was instrumental in introducing the Ensign Group and facilitating the transfer of the Camlu leases from Camlu to the Ensign Group. The court then awarded consulting fees and attorney fees to Erwin and Healthcare Properties, Inc. Cotter appealed.

DISCUSSION

CHOICE OF LAW

¶ 14 Cotter argues that Erwin is not a licensed real estate broker in either Texas or California. He was not, therefore, entitled to a commission for what amounts to real estate brokerage services in either of those states. Erwin responds that the express choice of law in the agreement was Washington, and that, so long as it does not offend the public policy of Washington as the forum state, the court should enforce the agreement.

Standard of Review

¶ 15 We will enforce a forum selection clause provided it is fair and reasonable. Exum v. Vantage Press, Inc., 17 Wash.App. 477, 478, 563 P.2d 1314 (1977). We generally review a court's decision to enforce a forum selection clause for abuse of discretion. Dix v. ICT Group, Inc., 125 Wash.App. 929, 934, 106 P.3d 841, review granted, 155 Wash.2d 1024, 126 P.3d 820 (2005). The standard of review applicable here, however, is not clear. Both abuse of discretion and de novo review have been applied. See Bank of Am., N.A. v. Miller, 108 Wash.App. 745, 748, 33 P.3d 91 (2001). The analysis of many so-called "abuse of discretion" questions can be broken down into questions of fact and the conclusions of law these facts support. State v. Karpenski, 94 Wash.App. 80, 102, 971 P.2d 553 (1999). That is what we do here.

Findings of Fact

¶ 16 The first question is whether there is sufficient evidence to support the findings underlying the court's decision. Cox v. Lewiston Grain Growers, Inc., 86 Wash.App. 357, 367, 936 P.2d 1191 (1997).

¶ 17 Here, the essential facts are easily supported by this record. Both Cotter and Erwin were experienced, seasoned businessmen with a particular expertise in the field of nursing homes and elder health care facilities. Erwin had both expertise and industry-wide contacts across state borders. Cotter wanted to take advantage of both that expertise and those contacts to extricate himself from what had proved to be very unfavorable lease arrangements with Camlu.

¶ 18 Erwin's services required transfer of leases from one entity to another. That naturally suggested Washington as the forum state, because Erwin was licensed only in Washington. It was for that reason that these sophisticated...