Leibsohn Prop. Advisors Inc. v. Colliers Int'l Realty Advisors (USA), Inc.

• Decision Date: 28 October 2013
• Docket Number: NO. 69445-6-I,69445-6-I
• Court: Washington Court of Appeals
• Parties: LEIBSOHN PROPERTY ADVISORS INCORPORATED, a Washington corporation, d/b/a LINC PROPERTIES, Appellant/Cross Respondent, v. COLLIERS INTERNATIONAL REALTY ADVISORS (USA), INC., a California corporation, and ARVIN VANDER VEEN and JANE DOE VANDER VEEN, and their marital community, and CITY OF SEATAC, a municipal corporation, Respondents/Cross Appellants.

LEIBSOHN PROPERTY ADVISORS INCORPORATED, a Washingtoncorporation, d/b/a LINC PROPERTIES, Appellant/Cross Respondent, v. COLLIERS INTERNATIONAL REALTY ADVISORS (USA), INC., a Californiacorporation, and ARVIN VANDER VEEN and JANE DOE VANDER VEEN,and their marital community, and CITY OF SEATAC, a municipalcorporation, Respondents/Cross Appellants.

NO. 69445-6-I

COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION ONE

FILED: October 28, 2013

UNPUBLISHED OPINION

LAU, J. —A superior court's authority in a chapter 7.04 RCW arbitration proceeding is limited. It can confirm, vacate, modify, or correct the arbitration award under RCW 7.04.050. A court can vacate such an award only on narrow grounds prescribed by statute. Because the trial court lacked statutory grounds to vacate the arbitration decision here, we reverse the court's order denying Colliers and VanderVeen's motion to confirm and remand with instructions to confirm the decision and vacate the sanctions imposed against those parties. But because Brian Leibsohn (1) fails to show a material issue of fact on each element of his tortious interference claim against SeaTac and (2) the transaction here was a "deed in lieu of foreclosure" within the meaning of Leibsohn's listing agreement, the trial court properly granted summary judgment dismissal in favor of SeaTac and properly denied Leibsohn's motion for partial summary judgment. We affirm in part, reverse in part, remand with instructions to confirm the arbitration decision, and award appellate attorney fees and costs to Colliers and Vander Veen.

FACTS

SeaTac Property

This case involves a dispute over a commercial real estate sales commission. K&S Developments Inc. formerly owned commercial real property in the City of SeaTac.¹ Leibsohn Property Advisors, Inc.² is a commercial real estate broker and member of the Commercial Brokers Association (CBA). Leibsohn first listed the SeaTac property for K&S in 2006 under an exclusive sale listing agreement. Leibsohn and K&S extended the agreement twice—once in 2007 and again in 2008—with no material changes to its terms.

Leibsohn listed the property as high as $28.5 million. According to the 2008 listing agreement (executed in November 2008), the asking price was $24.5 million.The 2008 agreement contained a tail provision entitling Leibsohn to a commission if a sale occurred within six months of the agreement's expiration if the purchaser had submitted an offer when the agreement was in effect. The agreement provided for a commission to Leibsohn of 4 percent of the sales price, up to a maximum of $490,000.

The SeaTac property was burdened by several debts secured by deeds of trust on the property. The following chart³ shows the principal amounts of the obligations on the property, the known default amounts, and the eventual payoff amounts:

Lender/obligation

Principal amount

Principal plus

default amounts and

fees

Eventual payoff

Avatar

$6,500,000

$7,434,837.48

$7,150,000

Centrum

$4,500,000

$7,840,643.72

$4,000,000

Velocity

$560,000

$560,000, plus

uncertain

$100,000

Kirby

$560,000

$560,000, plus

uncertain

$100,000

Back taxes

$562,623.55

$562,623.55

$562,623.55

Mechanics liens

$26,021.71

$26,021.71

$26,021.71

Total

$12,708,645.26

$16,984,126.46,

plus uncertain

$11,938,645.26

All four loans included personal guarantees from K&S's owners, Scott Switzer and Gerald Kingen.

The City of SeaTac was interested in acquiring land to further its long-term transportation corridor plans. In November 2007, SeaTac retained Colliers International Realty Advisors Inc. to assist it in identifying potential properties. Arvin Vander Veen isColliers's senior vice president. By summer 2008, Colliers identified the property at issue here as a potential acquisition that fit SeaTac's objectives. Colliers knew Leibsohn was the exclusive listing agent for the property. Colliers and SeaTac agreed that SeaTac's identity would not be disclosed to K&S in pursuing the property. Leibsohn had regular contact with Colliers and provided it with marketing materials on the property. SeaTac believed a reasonable purchase price was between $11 million and $11.5 million. At that time, Leibsohn was still listing the property for over $28 million, so SeaTac did not ask Colliers to pursue it. In November 2008, Leibsohn notified the local real estate brokers that the price had been reduced by $4.1 million, but SeaTac thought this price was still too high.

Default, Foreclosure, and Deed in Lieu Proposal

By spring 2009, K&S defaulted on its loan obligations. In May 2009, Centrum began foreclosure proceedings against K&S, Switzer and Kingen personally, and several junior lienholders. SeaTac was named as a defendant because it had a lien on the property and its interest would be subject to foreclosure in the proceeding. Centrum sought relief including a foreclosure sale of the property and deficiency judgments against Switzer and Kingen based on their personal guarantees.

In late June 2009, SeaTac contacted Colliers "wishing to discuss the fact that the loans secured by the Property were in default and that the Property was subject to a judicial foreclosure proceeding." At that time, Leibsohn was marketing the property for $21 million, still far above what SeaTac considered a reasonable price. Vander Veen reviewed the title reports and determined the property had about $13 million in debt. With that amount of debt, Vander Veen "did not believe it was possible for SeaTac toacquire the Property by making an offer to purchase the Property directly to the Property's owners, K&S Developments." Vander Veen thus "came up with the idea of trying to purchase the debt that was encumbering the Property," allowing SeaTac to either complete the judicial foreclosure or attempt to acquire the property in exchange for deeds in lieu of foreclosure. Vander Veen contacted Tom Hazelrigg, described as "the king pin between all [the] lending entities," for help in structuring the transaction. Hazelrigg was a co-member of Centurion Financial Group LLC with Scott Switzer and a personal guarantor on much of the property's debt.

Colliers began negotiating with the lenders. During the summer 2009, Colliers, with Hazelrigg's assistance, was able to obtain significant discounts from K&S's creditors. Kirby and Velocity were willing to release their liens for $100,000 each, despite being owed $560,000 each in principal. Centrum agreed to sell its promissory note for $4 million. Colliers negotiated with Avatar to purchase its note for $7,150,000 (consisting of the original principal balance of $6.5 million, plus an exit fee of $650,000). By late September 2009, SeaTac understood it would be able to acquire all the K&S debt for $11,350,000.

By October 2, Colliers also confirmed that K&S and its two principals, Kingen and Switzer, were willing to provide deeds in lieu of foreclosure in exchange for the release of their personal guarantees, if and when the four creditors sold their notes to SeaTac. The parties' communications reveal that they structured the transaction to avoid excise tax⁴ and to avoid paying Leibsohn's commission.

Amendment to Listing Agreement

On November 1, 2009, Leibsohn's 2008 listing agreement was set to expire. Leibsohn met with K&S's principals in the summer 2009 to discuss an extension. K&S agreed to extend the listing agreement for one year at a reduced price of $14,500,000. In August 2009—after the foreclosure proceedings commenced—Leibsohn prepared a new listing agreement, signed it, and sent it to K&S on August 18. Leibsohn's proposed extension included a lower price but otherwise contained the same terms as the previous agreements.

On September 28, 2009, K&S, Leibsohn, and Centrum met. K&S discussed with Leibsohn a proposal by Vander Veen in which Vander Veen would purchase the notes secured by the property and then obtain a deed in lieu of foreclosure on behalf of an undisclosed principal (SeaTac).

On October 2, 2009, Switzer e-mailed Leibsohn a counterproposal containing an amended listing agreement. The amended listing agreement set the price at $14.5 million and extended the listing agreement to November 1, 2010, and contained Switzer's handwritten exception:

No commission will be due in the event that the owners sign a deed in lieu of foreclosure. The potential transaction in which a third party may ask the owners to give up the property in exchange for removal of personal guarantees is specifically excluded as part of this sales/fee agreement.

Leibsohn testified in his deposition that the potential transaction Vander Veen was trying to structure was the only one he knew about at the time he received K&S's counterproposal. At the time, Leibsohn believed the new exclusion was "crafted" by Vander Veen and was certain that the change in fee structure was prompted by VanderVeen's proposed transaction. Switzer notified Leibsohn in writing that the commission exclusion was specifically intended to eliminate Leibsohn's right to a commission on the proposed Vander Veen transaction. "Attached is your signed fee agreement. I wrote in a fee exclusion for the proposed deed in lieu of transaction proposed through Tom Hazelrigg and Arvin Vander Veen."⁵ Switzer explained the rationale behind the new exclusion in Leibsohn's amended listing agreement:

This in our opinion is not a sale of the property but a loss of the property. We have hung in there with you as our broker for over 2 years. . . .

Short of a sale by you, we will either lose the property to our lenders or lose it to our new note holders in exchange for the deed. We lose and are in a serious negative position unless you can come through. We would gladly pay you a fee for selling the property. We will not pay a fee [to] give up our property to our lenders, no matter who they may be.

After receiving K&S's counterproposal, Leibsohn never discussed the new exclusion language with K&S. Leibsohn communicated directly with Vander Veen, sending him...