Midtown Ltd. Partnership v. Bangasser

• Decision Date: 04 May 2020
• Docket Number: 78998-8-I,78995-3-I,79871-5-I
• Court: Washington Court of Appeals
• Parties: MIDTOWN LIMITED PARTNERSHIP, a Washington limited partnership; FATHOM PROPERTIES LLC, a Washington limited liability corporation; THE MARGARET ELLEN DELANEY TRUST, a California trust; MARGARET E. DELANEY, an individual; TATOOSH LLC, a Washington limited liability corporation; CAROL ZAREK, an individual; and ELIZABETH HALL, an individual, Respondents, v. THOMAS F. BANGASSER, individually and on behalf of the marital community of Thomas F. Bangasser and Melissa Bangasser, Appellant, and BANGASSER & ASSOCIATES, INC., a Washington corporation, Defendant.

MIDTOWN LIMITED PARTNERSHIP, a Washington limited partnership; FATHOM PROPERTIES LLC, a Washington limited liability corporation; THE MARGARET ELLEN DELANEY TRUST, a California trust; MARGARET E. DELANEY, an individual; TATOOSH LLC, a Washington limited liability corporation; CAROL ZAREK, an individual; and ELIZABETH HALL, an individual, Respondents, v. THOMAS F. BANGASSER, individually and on behalf of the marital community of Thomas F. Bangasser and Melissa Bangasser, Appellant, and BANGASSER & ASSOCIATES, INC., a Washington corporation, Defendant.

Nos. 78998-8-I, 78995-3-I, 79871-5-I

Court of Appeals of Washington, Division 1

May 4, 2020

UNPUBLISHED OPINION

SMITH J.

This consolidated appeal arises from the trial court's resolution of a fundamental partnership dispute between pro se appellant Thomas Bangasser and the limited partners of MidTown Limited Partnership (MidTown), all of whom are his siblings or entities owned by siblings.^[1] Thomas argues that the trial court erred by concluding that he waived arbitration and that MidTown's counsel did not have a conflict of interest. He also challenges the trial court's award of attorney fees and costs to MidTown. We affirm and also award attorney fees and costs to MidTown on appeal.

FACTS

MidTown is a Washington limited partnership.^[2] The primary asset of the partnership was several parcels of commercial real estate in Seattle. Thomas was the general partner of MidTown from 1988 until June 2015, when the other four limited partners unanimously voted to remove him as general partner and replace him with their sister Margaret Delaney due to increasing discomfort with his management. Delaney immediately began to prepare the property for sale.

In September 2015, Thomas sued MidTown for breach of the partnership agreement, asserting that MidTown failed to compensate him for his partnership interest and for his past services as general partner. He also sought a security interest in the property and the appointment of a receiver for sale of the property. The trial court struck the lis pendens and awarded fees against him. Thomas then amended his complaint to assert that he was wrongfully removed as general partner, that the property was undervalued, that MidTown owed him management fees, and that the court should intervene in the process of valuing and distributing partnership assets. The court granted MidTown's motion for partial summary judgment and awarded attorney fees to MidTown, and we affirmed. Bangasser v. MidTown Limited P'ship No. 75226-0-I (Wash.Ct.App. Apr. 24, 2017) unpublished http://www.courts.wa.gov/opinions/pdf/752260.pdf.

Thomas nevertheless continued to insist that he was the sole legitimate general partner of MidTown and to act in accordance with this position. He insisted that the limited partners had undervalued the property, that his general partner interest comprised more than 21 percent of the value of the partnership, and that MidTown owed him a management fee. He notified professionals involved in the valuation and sale of the property that they should take no further action in selling it. He filed a lawsuit in federal district court arguing that he had granted a right of first refusal to acquire the property to his friend Omari Tahir-Garrett or to Africatown Community Land Trust, and he filed a lis pendens in connection with this claim. The federal court dismissed the claim and canceled the lis pendens. Thomas then opposed the partnership's efforts to remove Tahir-Garrett and a homeless encampment from the property.

On June 17, 2016, MidTown served a complaint in arbitration on Thomas pursuant to section 13.11 of the partnership agreement, which provides that "[a]ny dispute, controversy or claim arising out of or related to his Agreement, or the breach thereof, shall be resolved by binding arbitration." Thomas did not respond to the complaint. Instead, in a letter to the clerk of this court seeking an amended briefing schedule, he asserted that the demand for arbitration was a "strategy . . . intended to obstruct the orderly advance of this appeal on its merits."

On December 30, 2016, MidTown renewed its demand for arbitration. Thomas's new counsel rejected the demand:

[T]his matter already began litigation in [the first state action] because MidTown preserved no arbitration rights thereby waiving their arbitration rights. Furthermore, the issues involved with this case require a judicial forum because of the various equitable defenses we intend to present and the potential effects of the case on the community.

In May 2017, MidTown sold the property for $23, 300, 000. MidTown's general partner set aside $5 million as a contingency for claims and lawsuits and allocated the remaining funds equally among the five limited partners. Thomas claimed that he had sold half of his interest in the partnership to Africatown, so half of his share was deposited into a court registry. Because Thomas subsequently made statements inconsistent with this position, MidTown filed an interpleader action to determine who was entitled to those funds. The remaining distributable funds were distributed to Thomas's daughter and to his creditors.

On June 14, 2017, MidTown filed suit against Thomas seeking declaratory relief on all remaining partnership disputes including (1) the number of units each partner held, (2) whether Thomas was a general or limited partner, (3) whether he was owed a commission for his services as general partner (4) how much he was owed for his general partner interest, (5) whether the new general partners had mismanaged the partnership or its property, (6) whether the property sale was reasonable and in accordance with the partnership agreement, and (7) to whom Thomas's general partnership interest should be paid. Thomas's answer did not assert a right to arbitrate. Thomas then filed numerous counterclaims against MidTown asserting breach of the partnership agreement, breach of fiduciary duty, piercing the corporate veil, promissory estoppel, compensation for services to the partnership, unjust enrichment, disgorgement of funds owing, and failure to produce records.

After the parties engaged in substantial discovery and secured a date for a summary judgment hearing, Thomas moved to compel arbitration pursuant to the partnership agreement. The court ruled that Thomas had waived his right to enforce the arbitration agreement and denied the motion. The court subsequently entered three separate partial summary judgment orders resolving all substantive partnership issues in MidTown's favor and dismissed Thomas's counterclaims. The court awarded MidTown $400, 000.00 in attorney fees and $53, 441.04 in costs. Thomas appealed.

ANALYSIS

Arbitration

Thomas contends that the trial court erred in concluding that he waived arbitration pursuant to the partnership agreement. We review an order denying a motion to compel arbitration de novo. Verbeek Props., LLC v. GreenCo Envtl., Inc. 159 Wn.App. 82, 86, 246 P.3d 205 (2010).

"[W]aiver is an intentional relinquishment or abandonment of a known right or privilege." Schuster v. Prestige Senior Mgmt., LLC, 193 Wn.App. 616, 631, 376 P.3d 412 (2016). "The right to arbitrate is waived by 'conduct inconsistent with any other intention but to forego a known right.'" Verbeek, 159 Wn.App. at 87 (quoting Lake Wash. Sch. Dist. No. 414 v. Mobile Modules Nw, Inc., 28 Wn.App. 59, 62, 621 P.2d 791 (1980)). "Whether waiver occurs necessarily depends on the facts of the particular case and is not susceptible to bright line rules." Schuster, 193 Wn.App. at 633.

"To establish waiver of the right to arbitration, the party opposing arbitration must demonstrate '(1) knowledge of an existing right to compel arbitration; (2) acts inconsistent with that existing right; and (3) prejudice to the party opposing arbitration resulting from such inconsistent acts.'" Wiese v. Cach, LLC 189 Wn.App. 466, 480, 358 P.3d 1213 (2015) (internal quotation marks omitted) (quoting Letizia v. Prudential Bache Sec., Inc., 802 F.2d 1185, 1187 (9th Cir. 1986)).

"Washington courts apply a strong presumption in favor of arbitration." Heights at Issaquah Ridge Owners Ass'n v. Burton Landscape Grp., Inc., 148 Wn.App. 400, 405, 200 P.3d 254 (2009). The party opposing arbitration bears "the burden of showing the arbitration clause is inapplicable or unenforceable." Otis Hous. Ass'n v. Ha, 165 Wn.2d 582, 587, 201 P.3d 309 (2009).

Here, the trial court stated that Thomas waived his right to enforce the arbitration clause because "the answer and counterclaim do not assert the right to arbitration, the parties participated in substantial discovery, and this motion was filed after plaintiffs' motion for summary judgment was scheduled. The delay and resulting expenses caused prejudice." Thomas does not assign error to these findings, and they are verities on appeal. Cowiche Canyon Conservancy v. Bosley, 118 Wn.2d 801, 808, 828 P.2d 549 (1992).

Regardless we agree with MidTown that the record amply supports a finding of waiver. First, Thomas knew there was an existing right to enforce arbitration. He signed the amendment adding the arbitration clause to the partnership agreement in 2003, and he refused MidTown's arbitration demand in 2016. Second, his acts were inconsistent with his claim of a right to arbitrate. He filed suit in state and federal court raising disputes arising from the partnership agreement without asserting a right to arbitration. He then disregarded or rejected MidTown's June and December 2016 demands for arbitration. And when MidTown filed suit against Thomas in 2017, Thomas filed counterclaims without asserting a right to arbitrate. Thomas did not demand arbitration until December 2017, just as MidTown was preparing to move for summary...