Spencer v. Badgley Mullins Turner, PLLC

• Decision Date: 13 November 2018
• Docket Number: No. 76835-2-I,76835-2-I
• Citation: 6 Wash.App.2d 762,432 P.3d 821
• Parties: Leslie Blakey SPENCER and Tammy S. Blakey, Respondents/Cross Appellants, v. BADGLEY MULLINS TURNER, PLLC and Duncan C. Turner, Appellants/Cross Respondents.
• Court: Washington Court of Appeals

6 Wash.App.2d 762

432 P.3d 821

Leslie Blakey SPENCER and Tammy S. Blakey, Respondents/Cross Appellants,

v.BADGLEY MULLINS TURNER, PLLC and Duncan C. Turner, Appellants/Cross Respondents.

No. 76835-2-I

Court of Appeals of Washington, Division 1.

FILED: November 13, 2018

Publication Ordered December 24, 2018

Christopher Weldon Nicoll, Noah Jaffe, Nicoll Black and Feig PLLC, 1325 4th Ave. Ste. 1650, Seattle, WA, 98101-2506, for Appellants.

Charles Nelson Berry III, Berry & Beckett PLLP, 1708 Bellevue Ave., Seattle, WA, 98122-2017, for Respondent/Cross-Appellant.

Andrus, J.¶ 1 Leslie Blakey Spencer and Tammy S. Blakey sued their former attorney, Duncan Turner, and his firm, Badgley Mullins Turner, PLLC,¹ for legal malpractice, breach of fiduciary duty, and a violation of Washington’s Consumer Protection Act. These claims arose out of a 2012 lawsuit and subsequent appeal in which Leslie and Tammy sought to prevent the sale of commercial property they owned with their siblings. Blakey v. Blakey, No. 71036-2-I, 2015 WL 1467261 (Wash. Ct. App. Mar. 30, 2015) (unpublished).²

¶ 2 Turner appeals from an adverse jury verdict, raising four main issues on appeal. First, he contends the trial court, through erroneous summary judgment rulings and evidentiary decisions, relieved the sisters of their burden to prove that without Turner’s negligence, the sisters would have won the underlying case. Second, Turner argues that this court’s unpublished opinion in the Blakey v. Blakey appeal should not have been admitted in the malpractice trial. Third, Turner challenges the propriety of the damages jury instruction. Finally, Turner argues his motion for a new trial should have been granted based on the sisters’ counsel’s misconduct.

¶ 3 Leslie and Tammy filed a cross appeal, raising two main issues. They argue the trial court erred in allowing Turner to assert the affirmative defense of contributory negligence. They also argue that the trial court applied an incorrect legal standard in ruling on their breach of fiduciary duty claim and denying their request for disgorgement of legal fees paid to Turner. We affirm.

FACTS

¶ 4 In late 2011 and early 2012, Turner represented Leslie and Tammy in their attempt to buy out their siblings’ interests in a property they co-owned and to prevent the sale of the property to a third party.

¶ 5 Pursuant to a co-tenancy agreement (CTA), the four siblings—Leslie, Tammy, Greg, and Glenda-owned equal shares of property located on the Duwamish River on a site the Environmental Protection Agency had designated as a contaminated Superfund site (Snopac Property). A fish processing company, SnoPac Products, Inc., also co-owned by the siblings, had operated on the property for years.

¶ 6 The siblings have a lengthy history of litigation. They initially sued each other to determine the value of SnoPac Products, Inc. This dispute resulted in the entry of a monetary judgment in favor of Leslie and Tammy against SnoPac Products, Inc.³

¶ 7 Leslie and Tammy then raised concerns about Greg’s use of the Snopac Property. In 2011, Greg and Glenda told the sisters they wanted to sell the Snopac Property to Manson Construction Co. (Manson), the adjacent landowner. Manson asked the siblings for permission to conduct an environmental assessment of the property. Leslie and Tammy objected, but Greg and Glenda gave Manson permission to conduct the study and park their vehicles on the Snopac Property, despite the sisters’ objection.

¶ 8 Leslie and Tammy initiated a lawsuit, claiming that Greg and Glenda’s management decisions violated the CTA. They alleged Greg and Glenda’s conduct constituted a "default" under Section 12 of the CTA, giving the sisters the right to purchase Greg and Glenda’s interest in the Snopac Property at a steeply discounted price.

¶ 9 After filing suit, Leslie and Tammy fired their first attorney and retained Turner. The day Turner began representing Leslie and Tammy, Manson delivered its formal offer to purchase the Snopac Property. Manson offered $1 million payable as "[a]ll cash at closing with no financing contingency." Manson also offered an environmental liability indemnity initially capped at $1.5 million, which it later made unlimited (the Indemnification Match). Greg and Glenda contended that Leslie and Tammy could purchase their interests in the property under Section 13 of the CTA⁴ only if they could match Manson’s offer. Because they each owned a 25 percent interest, the sisters needed $500,000 to buy out Greg and Glenda’s interest (the Cash Match).

¶ 10 The parties filed cross motions for summary judgment before then-judge Mary Yu. Leslie and Tammy claimed that because Greg and Glenda breached the CTA, the sisters should be allowed to purchase the property under the default provision, Section 12. Greg and Glenda sought dismissal of Leslie and Tammy’s claim for specific performance under Section 12 of the CTA and asked the court to allow them to sell to Manson unless Leslie and Tammy could mirror Manson’s offer under Section 13 of the CTA.

¶ 11 On Friday, February 24, 2012, Judge Yu denied Leslie and Tammy’s motion and granted Greg and Glenda’s, authorizing Greg and Glenda "to close the proposed sale to Manson ... unless Leslie and Tammy elect to match the offer and proceed to provide proof of actual ability to do so as one would be required to do in any other bona fide offer." That same day, Greg and Glenda’s attorney, James Fowler, sent Turner a letter indicating that Greg and Glenda would sign off on Manson’s offer early on Monday, February 27, 2012, unless Leslie and Tammy provided adequate proof of their ability to match by Sunday, February 26, 2012.

¶ 12 Turner and his associate scrambled over the weekend to compile a list of Leslie’s and Tammy’s assets. On the morning of February 27, 2012, Fowler told Turner that he deemed Leslie’s and Tammy’s listed assets as inadequate to match Manson’s offer. To resolve the funding dispute, the parties went back before Judge Yu on February 28, 2012. Manson’s offer was set to expire that same day.

¶ 13 The legal malpractice dispute centers on the evidence Turner submitted to Judge Yu to establish his clients’ ability to mirror Manson’s purchase offer. Turner represented that Leslie and Tammy had the ability to purchase the Snopac Property and to mirror Manson’s indemnification agreement word-for-word. Turner prepared Exhibit A, a summary of Leslie’s and Tammy’s assets, to explain that the sisters had sufficient assets available for the Cash Match and the Indemnification Match. Exhibit A listed two conditionally approved bank loans totaling $500,000 and—as an alternative—another $355,138.09 from brokerage and retirement accounts belonging to Leslie’s significant other, Paul Neir. Turner estimated the net post-tax value of Neir’s accounts to be at least $250,000. The document also listed various other assets totaling over $2.4 million for the sisters to use to meet the Indemnification Match.

¶ 14 Neir had signed a declaration, prepared by Turner, indicating his willingness to pledge his assets to cover Leslie’s portion of the purchase price. Turner provided a copy of the declaration to Fowler, but he did not file the declaration with the court or provide a copy to Judge Yu. Instead, he included a statement in Leslie’s declaration to the effect that Neir was willing to pledge his assets to help Leslie complete the purchase. Because Fowler had a copy of the Neir declaration, he did not challenge the admissibility of Leslie’s statement; he understood that any evidentiary objection would be futile because Turner would simply file the Neir declaration if he raised an ER 801 objection.

¶ 15 Judge Yu ruled that Leslie and Tammy’s offer was not a mirror offer. She entered an order on February 28, 2012, authorizing Greg and Glenda to close the sale with Manson. In early March 2012, Leslie and Tammy terminated their relationship with Turner.

¶ 16 On January 28, 2015, Leslie and Tammy filed this lawsuit, alleging legal malpractice, breach of fiduciary duty, and a violation of Washington’s Consumer Protection Act.⁵

¶ 17 Two months later, this court issued its unpublished opinion in the sisters’ appeal of the real estate lawsuit. The court affirmed Judge Yu’s decision, concluding that Leslie’s and Tammy’s declarations demonstrated that they intended to fund the purchase with a combination of loan funds and personal assets if they failed to secure sufficient financing. Blakey, No. 71036-2-I, slip op. at 15. The court held the proffered financing was conditional and, thus, not equivalent to Manson’s cash offer. Id. The court also held that the sisters had insufficient liquid assets available to match Manson’s purchase price. Id. at 16. It noted

[a]lthough Leslie and Tammy offered bank records establishing that Neir’s accounts held the amounts claimed, they presented no affidavit or other admissible evidence in support of Neir’s willingness to pledge that money toward the purchase of the property. Because Leslie’s statement in her declaration that he was "willing and able" to do so is inadmissible hearsay, it was properly not considered on summary judgment. ER 801, 802 ; Dunlap v. Wayne, 105 Wash.2d 529, 535, 716 P.2d 842 (1986). The admissible evidence on summary judgment established only that Leslie and Tammy had $387,996.83 in their combined accounts, which fell short of the $500,000 cash they needed to match Manson’s offer.

Because there are no disputed facts regarding Leslie and Tammy’s inability to timely match Manson’s offer to purchase, Gregory and Glenda were entitled to summary judgment decreeing that Leslie and Tammy failed to match the offer and authorizing Gregory and Glenda to close the sale.

Id. The court did not reach the issue of whether Leslie and Tammy "matched the indemnity portion of the offer [or whether Manson’s] promise to indemnify was illusory." Id. at 16 n.6.

¶ 18 On summary judgment in the legal malpractice action, Leslie and Tammy claimed they had...