Ben Gervais, App/cross-resp V. Christopher Hamilton, Resp/cross-apps

CourtCourt of Appeals of Washington
DecidedSeptember 7, 2022
Docket55456-9
StatusUnpublished

This text of Ben Gervais, App/cross-resp V. Christopher Hamilton, Resp/cross-apps (Ben Gervais, App/cross-resp V. Christopher Hamilton, Resp/cross-apps) is published on Counsel Stack Legal Research, covering Court of Appeals of Washington primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ben Gervais, App/cross-resp V. Christopher Hamilton, Resp/cross-apps, (Wash. Ct. App. 2022).

Opinion

Filed Washington State Court of Appeals Division Two

September 7, 2022

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

DIVISION II BEN GERVAIS, No. 55456-9-II

Appellant

v.

CHRISTOPHER HAMILTON and JANE DOE UNPUBLISHED OPINION HAMILTON, husband and wife, and HG HOLDINGS LLC, a Washington limited liability company,

Respondents,

BEN GERVAIS,

Appellant.

AL SHOTT and JANE DOE SHOTT, husband and wife, and HERITAGE BANK, a federally regulated banking institution,

Respondents.

VELJACIC, J. — 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. 55456-9-II

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.

FACTS

I. FACTUAL BACKGROUND1

A. Hamilton and Gervais’s Business Relationship

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.

B. The Acquisition of the South Adams Property and Lease Agreement Pertaining Thereto

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

1 The substantive facts are drawn from the trial court’s unchallenged findings of fact, which are verities on appeal. Seven Hills, LLC, v. Chelan County, 198 Wn.2d 371, 384, 495 P.3d 778 (2021).

2 55456-9-II

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.

The lease agreement included a provision that set the valuation method for the South

Adams property in the event G&H exercised its purchase option. Paragraph 4(a) of the lease

provided that,

4. Option to Purchase: Landlord hereby grants Tenant an exclusive option to purchase the premises at any time during the lease term on the following terms and conditions:

(a) Option Price: The purchase price for the premises upon exercise of the option shall be determined by MAI appraisal. The parties shall attempt to agree on a single MAI appraiser. If, after 30 days following the exercise of the option by Tenant, the parties are unable to agree on the selection of an appraiser, each party shall proceed with their own MAI appraiser and the purchase price shall be an average of the two appraisals. If one appraiser is agreed upon the parties shall each pay ½ of the cost of the appraisal; if two appraisals are done each party shall pay the cost of their own appraisal.

Clerk’s Papers (CP) at 38. This provision was drafted so that there would be a fair way to value

the South Adams property.

3 55456-9-II

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.

The lease agreement also contained an attorney fees provision. That provision reads,

20. Attorneys’ Fees: Should either party bring any action or suit to enforce any of the provisions of this lease, such party shall, upon prevailing in such action or suit, be entitled, in addition to the relief therein granted, to such sum as the court may adjudge reasonable as attorneys’ fees at both the trial and appellate court levels.

CP at 41.

C. The Sale of the South Adams Property

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.

4 55456-9-II

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

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Ben Gervais, App/cross-resp V. Christopher Hamilton, Resp/cross-apps, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ben-gervais-appcross-resp-v-christopher-hamilton-respcross-apps-washctapp-2022.