Gail Davern, V Tim Liddiard And Kristin Shauck

• Court: Court of Appeals of Washington
• Decided: April 16, 2013
• Docket: 42657-9
• Status: Unpublished

Opinion

OURT OF APPEALS OMSIOu F .

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IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

DIVISION II

No. 42657 9 II - - GAIL DAVERN, an unmarried person,

Respondent,

TIM LIDDIARD and KRISTIN A. SHAUCK, UNPUBLISHED OPINION husband and wife, SOUTH BEND MILLS AND TIMBER COMPANY, and BRIX BROTHERS LOGGING COMPANY, and all other persons or parties unknown claiming any right, title, estate, lien, or interest in the real estate described in the complaint here,

JOHANSON, A. . While Gail Davern and Tim Liddiard were in a committed intimate J. C -

they purchased relationship ( CIR), real property in Pacific County. Before closing on the

property, they signed a joint venture agreement (JVA) that provided for disposition of the

property upon their deaths or termination of their relationship. When their relationship ended,

Liddiard and his new wife, Kristin Shauck, refused to quit claim the property to Davern as the

JVA required. Davern sued to quiet title in the property, and the trial court enforced the JVA,

granting summary judgment to Davern. We affirm because the JVA was not procedurally or

substantively unconscionable, and the trial court did not abuse its discretion in denying Liddiard No. 42657 9 II - -

and Shauck's motion to amend his answer after summary judgment or in awarding Davern

attorney fees. We decline Davern's request to impose CR 11 sanctions or grant her appellate

attorney fees.

FACTS

In 1983, Davern and her husband purchased a Utah home. Her husband died, and in

1992, Davern began a relationship with Liddiard. In 1993, Liddiard moved into Davern's Utah

home.

During their relationship,. two never married, Davern kept her own name, and they did the

not hold themselves out as married. In 1998, Davern and Liddiard discussed moving, and

Liddiard contributed repair work and maintenance on the Utah property to prepare it for sale.

Davern sold her Utah home in 1999 and, using the proceeds from the sale and money her mother

gifted to her, she purchased unimproved property near Naselle in Pacific County.

The couple planned to buy the unimproved Naselle property with Davern's money; then

Liddiard would build a home on it. In June 1999, they signed a purchase and sale agreement for

the property. And on November 9, 1999, the seller prepared and signed a statutory warranty

deed listing both Davern and Liddiard as owners.

Davern was concerned about risking her life savings under the couple's proposed

arrangement; she wanted to protect herself and her children should Davern and Liddiard's

relationship end. Davern asked Liddiard to enter into the JVA with her.

Davern had an attorney prepare the JVA. It provided that Davern would purchase the

property " ith her sole funds"and that Liddiard would contribute "his labor and expertise to the w

building and development of the parties' residence on the .property."Clerk's Papers (CP)at 10.

2 No. 42657 9 II - -

The joint venture would continue "until terminated, liquidated, or dissolved by law or as

hereinafter provided." CP at 9. Termination would occur following "[ ] breakup of the the

personal relationship of the parties."CP at 11.

The JVA provided that if either Davern or Liddiard predeceased the other, her or his heirs

would inherit their share of the property, 75 percent for Davern's heirs and 25 percent for

Liddiard's, regardless of whether Liddiard ever developed the property. If the parties separated

after Liddiard developed the property, Davern would reimburse him for his expenses and labor.

But under the JVA, if the parties separated before Liddiard improved the property, he would

simply quit.claim the property to Davern. The JVA included a choice of law provision that the

JVA " hall be construed and enforced under the laws of the State of Oregon."CP at 12. s

On November 30, 1999, Davern and Liddiard drove to Astoria, Oregon to review the

JVA, and both Davern and Liddiard signed it. The following day, Davern and Liddiard recorded

the statutory, warranty deed.

In October 2003, Davern and Liddiard ended their personal relationship before any

substantial improvements had been made to the property. Davern continued to pay the taxes on

the property. Liddiard eventually married Shauck.

In 2010, Davern contacted Liddiard about his obligation to quit claim the property to her.

Davern's attorney requested that Liddiard and Shauck honor the JVA and convey the property to

Davern. They refused, claiming that Liddiard was entitled to an equitable property distribution.

3 No. 42657 9 II - -

Davern then filed a claim to quiet title and for declaratory judgment.' Liddiard and

Shauck answered , admitting that Davern had purchased the Naselle property with her money

and that he did not build a house on it. He claimed however, that his repair work on Davern's

Utah home added to its sale value. So he asserted an equitable interest in the revenues from the

sale of Davern's Utah home, revenues used to purchase the Naselle property. He also claimed

that the JVA was invalid and that he was entitled to a just and equitable division of the property.

Davern moved for summary judgment against Liddiard and Shauck, arguing that the JVA

controlled and that Liddiard and Shauck had admitted all the material facts supporting its

enforcement. The trial court granted Davern's summary judgment motion on July 29, 2011.

On August 19, 2011, Liddiard and Shauck filed a combined motion for reconsideration,

clarification, and relief from judgment. They claimed that the trial court should have reviewed

the issues under Washington, rather than Oregon, law, and they asked the court to "clarify that it

has not yet ruled on Defendant's affirmative assertion of the existence of a meretricious

relationship." CP at 108. Then, on August 25, Liddiard and Shauck filed a motion to amend

their answer to include a new defense that the statute of limitations on an action under a JVA,a —

written contract, had expired. Davern opposed these motions as untimely.

On September 7, 2011, the trial court entered the final decree quieting title and judgment

as well as findings and conclusions while Liddiard and Shauck's motions were still pending. It

later denied all of their post order motions and entered findings and conclusions relating to those. -

Because parts of the property were owned decades earlier by now - defunct timber companies, she had to claim adverse possession against them and serve them by publication.

2 At the trial court, one attorney represented both Liddiard and Shauck and submitted joint filings on their behalf.

M No. 42657 9 II - -

The trial court also awarded Davern attorney fees and costs. It then added a supplemental

award of attorney fees to cover the handling of Liddiard and Shauck's post- ' order. motions.

Liddiard and Shauck appeal the trial court's final orders and attorney fees awards.

ANALYSIS

I. ENFORCEMENT OF THE JVA

Liddiard and Shauck argue that the trial court erred in enforcing the JVA and granting

summary judgment because genuine issues of material fact exist regarding the substantive and

procedural fairness of the JVA. We disagree.

We review summary judgment orders de novo. Mele v. Turner, 106 Wn. d 73, 81, 720 2

P. d 787 ( 1986). 2 Trial courts properly grant summary judgment where the pleadings and

affidavits show there is no genuine issue of material fact and the moving party is entitled to

judgment as a matter of law. CR c Questions of fact may be determined on summary 56( ).

judgment as a matter of law only where reasonable minds could reach but one conclusion.

Alexander v. County of Walla Walla, 84 Wn. App. 687, 692, 929 P. d 1182 (1997). 2

A. JVA not Equivalent to Prenuptial Agreement

As a threshold matter, Liddiard and Shauck argue that we should extend the fairness

standard used to evaluate the enforcement of prenuptial agreements to property contracts

between parties in a CIR. They analogize the JVA to a prenuptial agreement. They cite

Washington law, which evaluates prenuptial agreements for fairness, rather than standard

contract law, which reviews contracts for unconscionability. Unlike the JVA here, however, a

prenuptial agreement is a contract between individuals prior to and in consideration of marriage.

Because Davern and Liddiard signed the JVA years after they began a CIR, and not in

5 No. 42657 9 II - -

anticipation of forming a CIR, we decline to apply a fairness standard here. The policy

considerations that support application of a fairness standard to a prenuptial agreement are

simply not implicated.

In a related. argument, Liddiard and Shauck claim that the trial court erred in failing to

consider that Liddiard and Davern were in a CIR when they signed the JVA. Davern does not

dispute that she and Liddiard were in a CIR, but she responds that their CIR is immaterial to the

legal issues, and she asserts that contract law,not marriage or CIR law, applies in evaluating the

JVA's validity. Davern is correct.

Liddiard and Shauck claim that because Liddiard and Davern were in a CIR, Liddiard is

entitled to a just and equitable distribution of the Naselle property. Liddiard and Shauck assume

that the JVA is invalid. But in signing the JVA, Liddiard and Davern negated potential

community property claims relating to the property. Because we hold below that the JVA is

valid and enforceable, then any determination ( lack thereof)relating to the existence of a CIR or

is immaterial and did not preclude summary judgment.

B. Validity of JVA

We now turn to whether the JVA is valid. Per the JVA's choice of law provision, we

evaluate the contract's validity under Oregon law. Whether a case's facts support an

unconscionability finding is a legal issue that must be determined based on the facts in existence

when the parties formed the contract. Best v. U. . Nat'l Bank of Oregon, 303 'Or. 557, 560, 739 S

P. d 554, 556 .( 2 1987).The party asserting unconscionability bears the burden of demonstrating

that the contract or provision in question was unconscionable at formation. W. . May Co. v. L

Philco Ford Corp., - 273 Or. 701, 707, 543 P. d 283, 286 (1975). 2

Con No. 42657 9 II - -

In Oregon, contract unconscionability has two components: procedural

unconscionability, which refers to the conditions of contract formation; and substantive

unconscionability, which refers to a contract's terms. Motsinger v. Lithia Rose FT, Inc., - 211 Or.

App. 610, 614, 156 P. d 156, 160 (2007).Procedural unconscionability focuses on two factors: 3

oppression, which arises with unequal bargaining power between the contract's parties, resulting

in no real opportunity to negotiate contractual terms and the absence of meaningful choice; and

surprise, which involves the extent to which the supposedly agreed terms were hidden from the

party seeking to avoid the agreement's enforcement. Motsinger, 156 P. d at 160. Substantive 3

unconscionability focuses on whether the substantive terms unfairly favor the party with greater

bargaining power. Livingston v. Metro. Pediatrics, LLC, 234 Or. App. 137, 151, 227 P. d 796, 3

806 ( 2010). Whether a clause or contract is substantively unconscionable is an inquiry that

focuses on the one sided nature of the substantive terms. Vasquez Lopez v. Beneficial Oregon, - -

Inc., Or. App. 553, 567, 152 P. d 940, 948 (2007). 210 3

1. Procedural Unconscionability

Regarding procedural unconscionability, Liddiard and Shauck do not offer examples of

oppression or surprise. They claim that Davern rushed Liddiard to sign the JVA without having

a meaningful opportunity to review it. Liddiard claimed that on November 30, 1999, he and

Davern planned to close the purchase of the Naselle property; but before closing, Davern wanted

him to sign the JVA at an Astoria attorney's office. Davern provided him a copy of the JVA,but

Liddiard did not read it until he arrived at the attorney's office. Liddiard asserts that on the way

to Astoria, Davern told him that they were in a hurry " o drive to South Bend WA afterwards to t

record the deed," he had " ust a few minutes to review.the document."Br. of Appellant at 7. so j

7 No. 42657 9 II - -

Davern then told Liddiard to "hurry up and sign so they could drive to South Bend in time to

record the deed. 3 Br. of Appellant at 7. , Unlike common cases involving allegations of oppression, Liddiard and Shauck do not

claim that Davern refused to sign the closing documents or threatened to impose any negative

consequences on him if he did not sign. Moreover, Liddiard and Davern purchased the Naselle

property together in June 1999, and the seller included Liddiard on the statutory warranty deed

earlier in November 1999. Because the property deed already named Liddiard, Davern lacked

any leverage to force him to sign the JVAhe — was already listed as a grantee. Therefore,

Liddiard and Shauck do not carry their burden to demonstrate oppression as a component of

procedural unconscionability.

Surprise is the second component of procedural unconscionability. Liddiard and Shauck

argue that the JVA included a surprise provision stating that Davern purchased the Naselle

property with her sole fundsafter Liddiard read the provision and asked that it not be included —

in the final JVA. Liddiard read the JVA before he signed it. He spotted and underlined the

questionable provision. Liddiard then signed the JVA with the provision still included and when

he alerted Davern that he had signed a copy with the questioned provision included, she stated

that they could change the JVA later.

Liddiard and Shauck's facts, presented here, do not give rise to a claim of procedural

unconscionability by surprise because Davern did not hide from Liddiard the questionable

provision. Liddiard admits that he read the provision and even underlined it before signing. He

3Davem and Liddiard, however, signed the JVA the day before they recorded the deed. Accordingly, the record does not support Liddiard's story that Davern rushed him to sign the JVA so that they could record the deed the same - day. No. 42657 9 II - -

knew where the provision was located within the four page JVA, and he signed it without -

checking whether that copy contained the objectionable provision. Liddiard and Shauck cannot

demonstrate unconscionability by surprise because Davern did not hide the JVA's objectionable

provision. Liddiard and Shauck cannot demonstrate either oppression or surprise, so they cannot

meet their burden to show procedural unconscionability.

2. Substantive Unconscionability

Regarding substantive unconscionability,. Liddiard and Shauck argue that the JVA

unconscionably "gave Davern almost exclusive control over whether Liddiard ever received any

portion of his equity interest in the property."Br. of Appellant at 19. We disagree.

The JVA provided that Davern would purchase the Naselle property with her funds.

Liddiard would contribute no money to the property's purchase, but he would contribute his

labor and expertise"to building a residence on the property; and he would receive a 25 percent

property interest. CP .at 10. If their relationship ended, though, the JVA provided that Davern

would reimburse Liddiard for his labor and expenses in building a home and she would retain the

property. And in the event that one of the parties predeceased the other while they were still in a

relationship, Liddiard or his heirs would be entitled to a 25 percent property interest.

We evaluate these terms to determine whether they unfairly favored Davern and whether the JVA's substantive terms were one -sided. First, we look at the parties' contributions to the

joint venture: Davern would use her funds to purchase the property, and Liddiard would, at a

later point, contribute to building a home on it. Second, the JVA created a 75 percent property

4 Because Liddiard and Shauck argue that Davern had unfair bargaining power, we assume, without deciding, that Davern maintained greater bargaining power.

0 No. 42657 9 II - -

interest for Davern and a 25 percent interest for Liddiard. If either Davern or Liddiard

predeceased the other —whether Liddiard improved the property or not —Liddiard would

maintain a 25 percent interest; Davern, a 75 percent interest. Third, if Liddiard contributed any

labor or expertise to building a home on the property, and the parties terminated their

relationship before either of their deaths, Davern would reimburse Liddiard for his labor and

expenses. Davern would then retain ownership over the property, and Liddiard would " xecute, e

acknowledge and deliver any and all documents and instruments necessary to complete the

transfer of property"back to Davern. CP at 11.

Because the JVA created an avenue by which Liddiard would obtain a 25 percent interest

in the property without having to ever contribute to its development, the JVA was not

substantively unconscionable. And had Liddiard invested time or money in developing the

property, Davern would have reimbursed him. Because Liddiard and Shauck do not demonstrate

that the JVA's substantive terms unfairly favored Davern, they cannot bear their burden to show

substantive unconscionability

Liddiard and Shauck fail to demonstrate the JVA's procedural or substantive

unconscionability. Because they do not carry their burden, we affirm the trial court's

enforcement of the JVA in granting summary judgment. See W. .May Co., P. d at 286. L 543 2

II. MOTION TO AMEND

Liddiard and Shauck next argue that the trial court erred in denying their motion to

amend their answer to include a statute of limitations defense. We disagree.

The decision to amend pleadings is discretionary with the trial court, and we will not

overturn the trial court's refusal to permit such an amendment except for a manifest abuse of

10 No.42657 9 II - -

discretion. Lincoln v. Transamerica Inv. Corp.,89 Wn. d 571, 577, 573 P. d 1316 (1978). 2 2

When a party moves to amend after the adverse granting of summary judgment, it disrupts the

normal course of proceedings, and the trial court should consider whether the party could have

timely made its motion earlier in the litigation. Ensley v. Mollmann, 155 Wn. App. 744, 759,

230 P. d 599, review denied, 170 Wn. d 1002 (2010). 3 2

The statute of limitations in a contract action begins to run at the time of the breach. City

ofAlgona v. City of Pacific, 35 Wn. App. 517, 521, 667 P. d 1124, review denied, 100 Wn. d 2 2

1028 (1983).The statute of limitations on a contract action is six years. See RCW 4.6. 040. 1

Here, the trial court first granted summary judgment for Davern and against Liddiard and

Shauck on July 29, 2011. On August 25, nearly a month later, Liddiard and Shauck raised the

statute of limitations issue in a motion for leave to amend their answer. They admitted that they

could have brought the motion earlier. The trial court denied their motion to amend because (1)

amending the answer would be futile because the JVA expressed the parties' intent as to how

Liddiard and Davern wanted to distribute the property if their relationship ended, and (2)the

motion was untimely.

The JVA provided that the "Joint Venture shall be dissolved upon the happening of any

of the following events ... ( c) The breakup of the personal relationship of the parties."CP at 11.

The JVA also provided that, should the parties' relationship end before either party's death,

Davern would reimburse Liddiard for labor contributions and expenses and she would retain the

joint venture's remaining assets. And, Tim Liddiard agrees to execute, acknowledge and "

deliver any and all documents and instruments necessary to complete the transfer of property

back to Gail Davern in accordance with this agreement."CP at 11.

11 No. 42657 9 II - -

The parties agree that Liddiard and Davern's personal relationship ended in October

2003. In their motion to amend, Liddiard and Shauck asserted that Liddiard and Davern's

relationship termination triggered action under the JVA because it initiated any obligation to

return the property to Davern. Davern did not file her action to enforce the obligation until

October 29, 2010, seven years after their relationship ended.

But any breach of the JVA's terms did not occur until April 16, 2010, when Liddiard and

Shauck refused to sign the quit claim deed as Davern requested, pursuant to the JVA. The JVA

did not dissolve upon the termination of the parties' relationship; the JVA explained that the joint

venture dissolved upon the relationship's termination.

Because Davern filed her action just months after Liddiard and Shauck breached the JVA

by rejecting Davern's request to sign the quit claim deed, she filed her action well within the six-

year statute of limitations. Liddiard and Shauck filed their motion to amend weeks after the trial

court granted Davern's summary judgment motion, and they conceded that they had no

explanation for filing it so late and that it would create extra work and costs for Davern.

Therefore, Liddiard and Shauck cannot demonstrate that the trial court manifestly abused its

discretion in denying the motion to amend.

III. ATTORNEY FEES

Liddiard and Shauck next argue that (1)Davern's attorney fees award was unwarranted

and improper under law and equity; 2) ( Oregon law does not support an attorney fees award; and

3)even if Davern is entitled to attorney fees, fees incurred in prosecution of claims against the

timber companies should not have been included. We disagree.

12 No.42657 9 II - -

A. Trial Court's Award of Attorney Fees

The parties assert that the trial court awarded attorney fees to Davern under the common

law principle of bad faith and under an Oregon fee shifting statute that provides for fees for

defenses made without objectively reasonable basis. It also awarded attorney fees and costs to

Davern for her efforts to obtain title from now - defunct timber companies.

1. Bad faith

We review the reasonableness of a trial court's award of attorney fees for an abuse of

discretion: Progressive Animal Welfare Soc'y v. Univ. of Wash.,114 Wn. d 677, 688, 790 P. d 2 2

604 (1990). A trial court does not abuse its discretion unless it exercises its discretion in a

manifestly unreasonable manner or on untenable grounds or reasons. Progressive Animal

Welfare Soc'y, Wn. d at 688 89. 114 2 -

Bad faith litigation can warrant the equitable award of attorney fees. Hsu Ying Li v

Tang, 87 Wn. d 796, 798, 557 P. d 342 (1976).The trial court, though, must specifically find 2 2

bad faith in order to support its attorney fees award. See In re Recall of Pearsall- Stipek, 136

Wn. d 255, 267, 961 P. d 343 (1998).If it made such findings, we uphold the award so long as 2 2

substantial evidence in the record supports'the findings. Tradewell Group, Inc. v. Mavis, 71 Wn.

App. 120, 127, 857 P. d 1053 (1993).Substantial evidence is the quantum of evidence sufficient 2

to persuade a reasonable person the premise is true. Wenatchee Sportsmen Ass'n v. Chelan

County, 141 Wn. d 169, 176, 4 P. d 123 (2000). 2 3

s We need not apply Oregon law in analyzing attorney fees awarded under common law notions of equity.

13 No. 42657 9 II - -

The trial court found that Liddiard and Shauck acted in bad faith by refusing to comply

with the JVA. Substantial evidence supports this finding. Liddiard signed the JVA, but he and

Shauck refused to quit claim the deed to Davern. Liddiard and Shauck instead asserted that

Liddiard was entitled to an equitable partition of the Naselle property because he contributed to

the improvement of the Utah home before Davern sold it. But Liddiard and Shauck did not file a

counterclaim for contribution; nor did they petition to bring Davern and Liddiard's jointly-

acquired community assets before the trial court.

Liddiard and Shauck also claimed at the trial court that Davern pressured Liddiard to sign

the JVA, so that Liddiard and Davern could drive to South Bend to record the deed. This

account is inaccurate, though, because Liddiard signed the JVA a day before they recorded the

deed. In sum, the trial court found that Liddiard and Shauck acted in bad faith by failing to sign

the JVA. Substantial evidence supports these findings, enough to persuade a reasonable person

that Liddiard and Shauck acted in bad faith and raised defenses with no objectively reasonable

basis. Therefore, the trial court did not abuse its discretion in awarding attorney fees based on

bad faith against Liddiard and Shauck. See Progressive Animal Welfare Soc'y,114 Wn. d at 2

6 Because the trial court's finding supports an award of attorney fees on the common law basis of equity and the trial court did not explicitly rely on the Oregon statute, we do not address attorney fees under Oregon law.

14 No. 42657 9 II - -

2. Costs associated with the timber companies

Liddiard and Shauck also argue that they need not pay Davern for fees she incurred in the

prosecution of her claims against two now -defunct timber companies. But had Liddiard and Shauck signed the quit claim deedas required under the JVA— — Davern would not have

incurred the substantial attorney fees and costs associated with bringing her suit to quiet title,

including being forced to serve the defunct-imber companies by publication as required by law t

upon bringing a quiet title suit. See RCW 4.8. The trial court found that had Liddiard and 100. 2

Shauck not acted in bad faith, Davern would not have incurred these extra expenses.

Accordingly, the trial court did not abuse its discretion in awarding attorney fees based on these

additional costs.

B. Attorney Fees on Appeal

Davern seeks additional fees under CR 11, RCW 4.4.and RAP 18. ,to cover costs 185, 8 9

incurred on appeal. We decline her request.

CR 11 deters "baseless filings" and "abuses of the judicial system." Bryant v. Joseph

Tree, Inc., Wn. d 210, 219, 829 P. d 1099 (1992).CR 11 imposes duties on an attorney to 119 2 2

1)conduct a reasonable inquiry into the facts supporting an action; 2)conduct a reasonable .(

inquiry into the law to ensure that the pleading is warranted by existing law, or a good faith

argument for the extension, modification, or reversal of existing law; and (3)avoid filing the

pleading for any improper purpose, such as delay, harassment, or increasing the litigation costs.

Miller v. Badgley, 51 Wn. App. 285, 300, 753 P. d 530, review denied, 111 Wn. d 1007 (1988). 2 2

7 The trial court entered a default judgment against the defunct mills in June 2011, and in September quieted title in Davern, clearing any claim of the timber companies.

15 No. 42657 9 II - -

We decline to impose CR 11 sanctions because CR 11 applies only to superior court actions. CR

1 ( " These rules govern the procedure in the superior court in all suits of a civil nature. ").

Davern also requests attorney fees under RCW 4.4.and RAP 18. for Liddiard and 185 8 9

Shauck's frivolous, baseless bad faith appeal. An appeal is frivolous if we are convinced that it

presents no debatable issues on which reasonable minds could differ and is so lacking in merit

that there is no possibility of reversal. In re Marriage ofFoley, 84 Wn. App. 839, 847, 930 P. d . 2

929 (1997). We' exercise our discretion and deny Davern's request for attorney fees because

Liddiard and Shauck's arguments on appeal present an issue on which reasonable minds may

differ.

We affirm.

A majority of the panel having determined that this opinion Will not be printed in the

Washington Appellate Reports, but will be filed for public record in accordance with RCW

040, 2.6.it is so ordered. 0

J. Johanson, .(,'. We concur:

8 We acknowledge that our decision not to award appellate attorney fees may appear inconsistent with our holding affirming the trial court's attorney fees award. Though we view the matter differently than the trial court, we believe that the trial court acted within its discretion in awarding attorney fees.

Tel