Nw. Cascade, Inc. v. Unique Constr., Inc.

• Decision Date: 19 May 2015
• Docket Number: No. 45312–6–II.,45312–6–II.
• Citation: 351 P.3d 172,187 Wash.App. 685
• Court: Washington Court of Appeals
• Parties: NORTHWEST CASCADE, INC., a Washington corporation, Respondents/Cross–Appellants, v. UNIQUE CONSTRUCTION, INC., a Washington corporation; Temporal Funding, LLC, a Washington Limited Liability Company; the William K. and Marion L. LLLP ; and Sahara Enterprises, LLC, Defendants, William Rehe and Suzanne Rehe, Appellants/Cross–Respondents.

187 Wash.App. 685

351 P.3d 172

NORTHWEST CASCADE, INC., a Washington corporation, Respondents/Cross–Appellants

v. UNIQUE CONSTRUCTION, INC., a Washington corporation; Temporal Funding, LLC, a Washington Limited Liability Company; the William K. and Marion L. LLLP ; and Sahara Enterprises, LLC, DefendantsWilliam Rehe and Suzanne Rehe, Appellants/Cross–Respondents.

No. 45312–6–II.

Court of Appeals of Washington, Division 2.

May 19, 2015.

Martin Burns, Burns Law, PLLC, Tacoma, WA, for Appellants.

William John Crittenden, Attorney at Law, Michael John Murphy, Allison Louise Murphy, Groff Murphy PLLC, Seattle, WA, for Respondents.

Opinion

WORSWICK, J.

¶ 1 Northwest Cascade, Inc. (NWC) secured a judgment against Unique Construction, Inc. (Unique), a corporation owned by William and Suzanne Rehe. In an earlier appeal, Division One of this court held that Unique's corporate veil could be pierced, paving the way for NWC to collect its judgment against the Rehes. The Rehes filed a homestead declaration on Unique's “89th Street Property,” which the trial court quashed.

¶ 2 The Rehes now appeal the trial court's order quashing the homestead declaration, arguing that (1) the trial court lacked personal jurisdiction over them, (2) the trial court violated RAP 7.2 by considering NWC's motion to quash while the appeal was pending in Division One of this court, (3) a claimant is an owner of a property under the homestead statutes if they possess and use that property, even if they have no legal or equitable interest in it, and (4) they have a legal or equitable interest in the 89th Street Property because either their contributions and residence at the property give them a legal or equitable interest or piercing the corporate veil gave them Unique's interest in the property.

¶ 3 NWC cross-appeals the trial court's denial of its request for attorney fees and costs incurred to litigate its motion to quash, arguing that it is entitled to attorney fees and costs as the prevailing party because litigating its motion to quash was a “collection proceeding” that fell within the attorney fees and costs provision of NWC's contract with Unique.

¶ 4 We affirm the trial court's order quashing the homestead declaration, holding that (1) the Rehes waived personal jurisdiction by failing to timely raise it, (2) the trial court had authority under RAP 7.2 to consider NWC's motion to quash, (3) a claimant must have either a legal or an equitable interest in a property to be an owner of it under the homestead statutes, (4) Unique held all legal and equitable interest in the 89th Street Property, and (5) piercing of the corporate veil does not allow the Rehes to claim a homestead exemption in Unique's property. However, we reverse the trial court's denial of NWC's attorney fees and costs by holding that litigating NWC's motion to quash falls within the contract's attorney fees and costs provision. We remand for a determination of NWC's reasonable attorney fees consistent with this opinion.

FACTS

A. Background

¶ 5 The Rehes are Unique's sole shareholders. William Rehe is Unique's president. In 2004 and 2005, Unique began acquiring lots for the development of a 34–lot residential real estate project in Tacoma.¹ On March 27, 2006, Unique entered into a contract with NWC to build the plat's infrastructure. The contract contained an attorney fees and costs provision that stated:

If the contract price is not paid as agreed and if collection proceedings or a suit is started, then [Unique] agree[s] to pay all costs incurred by [NWC], including all costs of suit and a reasonable attorneys' fee as determined by the court.

Clerk's Papers (CP) at 302.

¶ 6 In 2006, the Rehes moved into Unique's 89th Street Property, which was a lot with a house built by Unique. Without paying Unique rent, the Rehes continued to reside at the 89th Street Property through this litigation except for an 18–month period when they temporarily moved out.

B. Unique's Breach of Contract, NWC's Suit, and Unique's Transfer of the 89th Street Property

¶ 7 Unique stopped paying NWC on the contract. On My 7, 2008, NWC sued Unique for breach of contract.

¶ 8 On July 29, 2009, Unique recorded a quitclaim deed transferring the 89th Street Property to a Nevada limited liability company (LLC) named Black Point Management. On December 16, 2010, Black Point transferred the 89th Street Property by quitclaim deed to an LLC controlled by a limited liability limited partnership that was formed at the Rehes' direction. The transfers of the 89th Street Property were identified as tax exempt and no consideration was paid for them. The transfers of the 89th Street Property left Unique insolvent.

¶ 9 On October 30, 2009, NWC amended its complaint to add the Rehes as defendants and to add two additional claims: a claim seeking to pierce Unique's corporate veil to hold the Rehes personally liable and a claim under the Uniform Fraudulent Transfer Act² (UFTA) for fraudulent conveyance of the 89th Street Property.

C. Bifurcated Trial

¶ 10 The breach of contract and UFTA claims were tried to a jury. The jury returned a verdict in favor of NWC on both claims, and made a special finding that Unique transferred the 89th Street Property with the actual intent to hinder, delay, or defraud creditors. The veil piercing claim then went to a bench trial after which the trial court ruled that Unique's corporate veil could not be pierced.

¶ 11 The trial court entered a judgment against Unique for $216,505.46. The trial court also voided the transfer of the 89th Street Property and quieted title to Unique. The trial court awarded attorney fees and costs to NWC for the breach of contract and UFTA claims, and awarded attorney fees to the Rehes for the veil piercing claim. The trial court dismissed the Rehes with prejudice.

D. First Appeal

¶ 12 NWC appealed the trial court's denial of the veil piercing claim and its award of attorney fees to the Rehes. Unique cross-appealed the attorney fees and costs award. This appeal was heard by Division One of this court. See Nw. Cascade, Inc. v. Unique Const., Inc., noted at 180 Wash.App. 1017, 2014 WL 1289586, review denied, 181 Wash.2d 1009, 335 P.3d 941 (2014).

E. Writ of Execution on the 89th Street Property and NWC's Motion To Quash

¶ 13 While the appeal was pending, the trial court entered a writ of execution against the 89th Street Property. Prior to the 89th Street Property's sale, the Rehes filed a homestead declaration, claiming to have lived at the property since 2002.

¶ 14 NWC filed a motion to quash the Rehes' homestead declaration. The Rehes filed a memorandum opposing NWC's motion. After a hearing on NWC's motion to quash, where the Rehes presented argument, the trial court entered an order quashing the Rehes' homestead declaration. The trial court ruled that the Rehes could not claim a homestead exemption in the 89th Street Property because they lacked a sufficient interest in that property to be owners of it under the homestead statutes and because NWC executed against the 89th Street Property to recover Unique's debt (rather than the Rehes' debt). The trial court denied NWC's request for attorney fees and costs for litigating its motion to quash.

¶ 15 The Rehes filed a motion for reconsideration, arguing for the first time that the trial court lacked personal jurisdiction over them. The trial court denied the motion for reconsideration. The trial court also denied NWC's request for attorney fees and costs to defend against the Rehes' motion for reconsideration.

F. Division One's Reversal of the Trial Court's Veil Piercing Ruling

¶ 16 On March 31, 2014, Division One reversed the trial court's veil piercing ruling and held that Unique's corporate veil could be pierced. Nw. Cascade, Inc., 180 Wash.App. 1017, 2014 WL 1289586, at *6. Division One remanded the issues of attorney fees and costs for the trial court's determination consistent with the reversal. 180 Wash.App. 1017, 2014 WL 1289586, at *6.

¶ 17 The Rehes appeal the order quashing the Rehes' homestead declaration. NWC cross-appeals the trial court's denial of attorney fees and costs for litigating its motion to quash.

ANALYSIS

I. Personal Jurisdiction

¶ 18 The Rehes argue the trial court lacked personal jurisdiction over them because the trial court had previously dismissed them with prejudice when it entered its judgment. NWC argues the Rehes waived their personal jurisdiction defense by failing to timely raise it. We agree with NWC.

¶ 19 A party who fails to raise the personal jurisdiction defense in any entry of appearance, pleadings, or answers waives that defense and “submits himself or herself to the jurisdiction of the court.” In re Marriage of Steele, 90 Wash.App. 992, 997, 957 P.2d 247 (1998) ; see State ex rel. Coughlin v. Jenkins, 102 Wash.App. 60, 63, 7 P.3d 818 (2000). “Even informal acts, such as written or oral statements to the plaintiff in the action can constitute an appearance.” Coughlin, 102 Wash.App. at 63, 7 P.3d 818.

¶ 20 Here, NWC filed a motion to quash. The Rehes filed a memorandum in opposition to NWC's motion to quash and appeared at the hearing, but did not raise a personal jurisdiction defense until its motion for reconsideration of the trial court's order quashing the Rehes' homestead declaration. Thus, by failing to raise the personal jurisdiction defense in their answer and in their appearance at the hearing, the Rehes waived that defense and submitted themselves to the trial court's jurisdiction.

II. Violation of RAP 7.2

¶ 21 The Rehes argue the trial court violated RAP 7.2 by ruling on NWC's motion to quash while the Division One appeal was pending. We disagree.

¶ 22 After review is accepted, the trial court has authority to act in a case only to the extent provided by RAP 7.2. RAP 7.2(e) states in part:

Postjudgment Motions and Actions to Modify Decision. The trial court has authority to hear and determine (1) postjudgment motions authorized by the civil rules, the criminal rules, or statutes.... If the trial

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