Gervais v. Hamilton
| Decision Date | 07 September 2022 |
| Docket Number | 55456-9-II |
| Parties | BEN GERVAIS,Appellant v. CHRISTOPHER HAMILTON and JANE DOE HAMILTON, husband and wife, and HG HOLDINGS LLC, a Washington limited liability company,Respondents, BEN GERVAIS,Appellant. v. AL SHOTT and JANE DOE SHOTT, husband and wife, and HERITAGE BANK, a federally regulated banking institution,Respondents. |
| Court | Washington Court of Appeals |
UNPUBLISHED OPINION
Ben Gervais appeals the trial court's order granting attorney fees and costs to Christopher Hamilton, Heritage Bank, and the bank's vice president, Al Shott (Heritage and Shott collectively referred to as "Heritage Bank"). Gervais argues that the trial court did not have a legal basis to award attorney fees and costs to Hamilton and Heritage Bank because neither he nor they were parties to the lease agreement at issue. Hamilton and Heritage Bank request attorney fees and costs on appeal.
We agree with Gervais and hold that the trial court erred in granting attorney fees and costs to Hamilton and Heritage Bank and reverse the trial court's order. We also deny Hamilton's and Heritage Bank's requests for attorney fees and costs on appeal.
In 2008, Gervais and Hamilton formed G&H Enterprises, Inc. (G&H) in order to operate Rainbow International, a business which was previously owned and operated by Gervais and his former spouse. At the time G&H was created, Hamilton owned 51 percent of the shares and Gervais owned 49 percent.
In 2012, Gervais and Hamilton formed HG Holdings, LLC (HG), where they were equal members. Under HG's operating agreement, Hamilton is the managing member and is therefore in charge of the company's business needs. Despite being a limited liability company, Gervais and Hamilton ran HG as a partnership, similar to their other business ventures.
HG held title in certain real property located on Fawcett Avenue. In late 2013, through HG, Gervais and Hamilton sold the Fawcett property.
In November 2013, after selling the Fawcett property, Gervais and Hamilton identified certain commercial real estate located at 6035 South Adams Street (South Adams property) in Tacoma, which they believed would suit the needs of Rainbow International (operated by G&H). Through HG, Gervais and Hamilton purchased the South Adams property for $725,000. HG rented the South Adams property to G&H for $5,000 per month. This tenancy had no written lease.
In May 2016, Gervais and Hamilton decided to separate most of their joint business interests, except for the ownership of the South Adams property. Hamilton redeemed Gervais's stock ownership in G&H and bought out his interest in Rainbow International. In exchange, Gervais and Hamilton agreed on the terms of a lease agreement between G&H and HG, which provided G&H with an option to purchase the South Adams property during the term of the lease. The decision to have HG enter into the lease with the purchase option had the effect of putting G&H and Hamilton on both sides of a transaction if G&H elected to exercise the option, per HG's operating agreement.
Clerk's Papers (CP) at 38. This provision was drafted so that there would be a fair way to value the South Adams property.
The only parties to the lease agreement were the landlord, HG, and the tenant, G&H. Hamilton signed the lease in his capacity as the managing member of HG and president of G&H. Gervais did not sign the lease.
By late 2017 and early 2018, G&H and Rainbow International entered into a new fire restoration market which increased G&H's need for space to conduct business. In April 2018, Hamilton contacted Gervais about his interest in purchasing the property or having G&H exercise its purchase option in the lease agreement. Gervais stated that he was not interested in selling the South Adams property.
On or about June 4, invoking the language of the lease, Hamilton contacted Gervais about obtaining a Member Appraisal Institute (MAI) appraiser, blindly selected from Heritage Bank's list, to establish the purchase price of the South Adams property. That same day, Heritage Bank provided Hamilton with a pricing list of the blind bids submitted to conduct the appraisal. Hamilton selected the lowest bidder. On that basis, Heritage Bank sent an engagement letter to Patrick Johnson of Montro & Johnson, requesting him to conduct an appraisal of the South Adams property.
On June 12, Gervais responded to Hamilton, stating that he believed "it would be best if we both got appraisals done on the building so we are not just held to one." CP at 57.
On or about June 14, Gervais contacted his friend, Scott Krause, a business broker primarily involved in the sale of marijuana businesses under Initiative 502. Krause advised Gervais that the South Adams property was worth between $1,100,000 and $1,300,000.
On July 3, Hamilton received a copy of Johnson's appraisal from Heritage Bank, which valued the South Adams property at $900,000. Although the Johnson appraisal might have been on the low end of value, it was based on a reasoned assessment of the market and did not reveal any evidence of bias.
Heritage Bank then began preparing documents for a loan in the amount of $700,000, pursuant to Hamilton's request. Heritage Bank was aware that Hamilton was utilizing the Johnston appraisal to exercise the purchase option under the lease. It did not participate in, advocate for Hamilton, or otherwise interfere with any negotiation between Gervais and Hamilton.
Gervais believed he could oppose the sale of the South Adams property and had a right to be included in the selection of appraisers to value the property. However, on August 16, Gervais learned that Hamilton did not need his permission or involvement to sell the South Adams property. Hamilton did not realize that he could proceed without Gervais's consent until mid-July 2018.
On August 20, Gervais invited Hamilton over to his home to discuss the proposed sale of the South Adams property. Gervais told Hamilton that he believed the property was worth $1,200,000. Gervais then agreed to have an MAI appraiser value the property.
Gervais then contacted Mark Percival to appraise the South Adams property. Percival was not an MAI appraiser.
On August 21, Percival met with Gervais and Hamilton at the South Adams property. CP 63. At this meeting, Percival made a number of statements that caused Hamilton to believe that he approached the appraisal from a biased standpoint. Despite Hamilton's concerns, Gervais insisted on having Percival as the appraiser he trusted to value the South Adams property.
On August 21 and 22, Hamilton signed the purchase and sale agreement and sent a letter to Gervais formally exercising the purchase option in the lease agreement based on the Johnson appraised value of $900,000. The transaction closed on August 30 and Gervais received all net proceeds.
On April 23, 2019, Gervais filed an amended complaint against Hamilton and HG. Relevant here, Gervais alleged that Hamilton breached certain fiduciary duties by selling the South Adams property under its fair market value from HG to G&H. Gervais also alleged that Hamilton acted with gross negligence or engaged in willful misconduct under former RCW 25.15.155 (1994), which governs the obligations of Hamilton as the managing member of HG. Gervais also requested attorney fees and costs.
On June 30, 2020, Gervais filed a separate action against Heritage Bank. Gervais alleged that Heritage Bank intentionally interfered with his "contractual rights and business expectancy" by agreeing to and authorizing the Johnson appraisal. CP at 657. Gervais also alleged that Heritage Bank "engaged in a civil conspiracy by agreeing and acting in concert to accomplish an unlawful purpose, the sale of the [South Adams] property in violation of the [purchase option in the lease agreement] at less than fair market value." CP at 658. Gervais further contended that Heritage Bank engaged in unfair and deceptive practices with respect to the Johnson appraisal in violation of Washington's Consumer Protection Act (CPA). Gervais claimed $200,000 in damages which included the legal fees incurred in...
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