Mary Mitchell v. Soundview Investment Group

• Court: Court of Appeals of Washington
• Decided: January 11, 2016
• Docket: 71165-2
• Status: Unpublished

Opinion

IN THE COURT OF APPEALS FOR THE STATE OF WASHINGTON.

MARY MITCHELL, No. 71165-2-1 Appellant,

DIVISION ONE

SOUNDVIEW INVESTMENT UNPUBLISHED OPINION GROUP, LLC

Respondent. FILED: January 11, 2016

Spearman, C.J. — The superior court rejected Mary Mitchell's appeal of a

small claims court judgment in favor of Soundview Investment Group, LLC

(Soundview). Mitchell appeals, claiming that Soundview committed fraud by

falsely stating that it was a licensed and bonded contractor and that she was

denied her right to a fair trial because she was not properly served with

Soundview's counterclaim. Finding no error, we affirm the superior court.

FACTS

Mary Mitchell and Stanley Johnson are investors who purchase

properties, remodel them, and sell them for a profit. Johnson is also a licensed

general contractor who hires subcontractors such as Art by Ara, Inc. (Art) to

perform the remodeling work. Art is a licensed and bonded contractor. In early

2013, Mitchell and Johnson began to talk about potentially working together. No. 71165-2-1/2

Mitchell was interested in having the floors refinished in one of her

investment properties. Johnson showed her some examples of work that Art had

done, and Art gave Mitchell a bid of $2,300 to perform the floor work. ]d. Mitchell

told Johnson that her budget was only $1,600. Art agreed to do the work for

$1,600 in anticipation of receiving future contracts through Johnson and Mitchell.

Art and Soundview, of which Johnson was the operations manager,

submitted a bid for the project on April 2, 2013. Mitchell accepted the bid and

gave them a deposit for $825. Art and Soundview had previously worked

together on a number of investment projects, and Art agreed to take the job if

Soundview acted as the middleman for the relationship and handled

communication and billing. Johnson agreed on behalf of Soundview and assured

Art about the potential for an ongoing relationship with Mitchell.

Mitchell asked for bids for some additional painting and mirror work. Art

agreed to do the requested work on the mirrors for a low additional cost. Art

removed the old stain and seal and sanded and sealed the floor. The floor

treatment needed at least eight to twelve hours minimum drying time in order for

it to cure properly. If the floor is walked on before it is dry, it will cause the

treatments to bond together and create a "kind of white ash effect." Verbatim

Report of Proceedings (VRP) at 28. In order to remove that effect, the floor must

be resanded and resealed.

According to Mitchell, the floors were not done properly because there

was visible dust, and "marks, white marks, and part of the floor was black", and

there "was dirt under the varnish." VRP at 12. Art had to resand the floor twice No. 71165-2-1/3

after the original application, because the floor had been walked on before it was

dry. Soundview had notified Mitchell that the floor was being walked on and

asked her to '"take the key out of the key box'" in order to prevent people from

walking on the floor. Jd. at 41. Mitchell denied that there were ever people

walking on the floor and argued that the damage was a result of Soundview and

Art failing to sand the floor properly.

Mitchell brought in another contractor and decided she wanted to change

the floor color and gloss finish. Soundview informed her that it would cost more,

because it would require resanding the entire floor again and purchasing new

products. At that time, the floor was still drying and the final coat of finish was

scheduled to be applied that day. Mitchell canceled the appointment, telling

Soundview that she was not going to pay any more and that they had to redo it or

she was going to hire another contractor.

Soundview and Art did not do any more work for Mitchell and submitted a

final invoice for $1,556.64, which was the total of all charges including the mirror

work, minus Mitchell's initial deposit. Mitchell did not pay and Soundview and Art

filed a lien on the property for the amount due. The property was sold on June

20, 2014 and the lien was not reconciled.

Mitchell filed an action against Soundview and Art in the small claims

department of King County District Court on July 12, 2013. Soundview and Art

filed a counterclaim for the balance of the contract and other damages. The

counterclaim was mailed to Mitchell at her post office box on August 7, 2013. Art

submitted a letter explaining the relationships between the two companies and No. 71165-2-1/4

how Soundview did not do any of the finishing work but was responsible for

communicating with the customer and handling the billing.

The small claims court entered judgment on August 23, 2013, in favor of

Soundview and Art in the total amount of $2,085.07, finding that Art was a

registered contractor, as was Johnson. The court also found that Soundview and

Art performed their contractual obligations in a workmanlike manner and made

good faith efforts to satisfy Mitchell's complaints.

Mitchell first moved for relief from judgment on August 26, 2013, arguing

procedural errors, including that she had no knowledge of any counterclaim until

trial and had objected to its introduction. She then appealed the district court's

judgment to King County Superior Court on September 20, 2013, arguing only

that the contract was invalid on its face because Soundview was not a licensed

contractor. The small claims court did not rule on her motion for relief from

judgment but forwarded it to the superior court.

The superior court affirmed the district court's decision on November 7,

2013, modifying the judgment amount to $1,556.64, the amount due under the

contract. The court found that Johnson was authorized to act as an agent for Art,

a licensed and bonded contractor. The court also found that "[rjather than

deficiencies in the defendants' work, it seems that any problems with the finished

product were apparently the result of 3rd parties walking on the floor too soon."

Clerk's Papers (CP) at 116. Mitchell appeals the decisions of both the small

claims and superior courts. Soundview did not file an appellate brief. No. 71165-2-1/5

DISCUSSION

An appeal from a small claims judgment or decision is de novo upon the

record of the case, as entered by the district court. RCW 12.36.055. Under CRLJ

72, an appeal from a decision of a small claims court operating under chapter

12.40 RCW shall be a trial de novo on the record from the court of limited

jurisdiction. The procedures for a trial de novo are defined by CRLJ 73 and CRLJ

75. Under the standard set forth in RCW 12.36.055, this court also reviews de

novo the record of the small claims court proceeding.

Mitchell first claims that she is entitled to a new trial because she was not

properly served with Soundview's answer and counterclaim. She argues that the

small claims court "failed to require proof that she "had signed for receipt of the

answer, counterclaim and discovery," resulting in an unfair trial. Br. of Appellant

at 10.

Under RAP 2.5(a), a party generally waives the right to appeal an error

unless there is an objection at trial. The rule serves to encourage parties to make

timely objections and gives the trial judge opportunity to address issues as they

occur. State v. Kalebaugh, 183 Wn.2d 578, 583, 355 P.3d 253 (2015). While

Mitchell argued to the small claims court, both at trial and in her motion for relief

from judgment, that she did not receive the counterclaim, she failed to raise the

issue in her appeal to the superior court. An issue cannot be raised on a second

appeal if it could have been raised on the first appeal. State v. Sauve, 100 Wn.2d

84, 87, 666 P.2d 894 (1983). No. 71165-2-1/6

Mitchell argues that "[i]n a small claims trial... [t]he parties are not

required to make formal objections on the record to preserve them for appeal."

Br. of Appellant at 9. She cites no authority for this argument, however. RAP

2.5(a) contains no exception for review of small claims judgments or decisions.

Under RCW 12.36.055, the appeal from a small claims judgment shall be de

novo upon the record of the case, as entered by the district court. Itwould be

difficult, if not impossible, for an appellate court to review an issue that was not

part of the district court's record. Mitchell also argues that service is a

jurisdictional issue that may be raised for the first time on appeal. But as the

plaintiff, she has already submitted to the jurisdiction of the district court. There

are no jurisdictional issues that would enable Mitchell to raise the issue of service

of a counterclaim for the first time on appeal.

Even if Mitchell had properly preserved the issue for appeal, we would find

no error. The record contains evidence that Soundview complied with the court

rule and attempted to serve Mitchell with the counterclaim. Under CRLJ

5(a)(b)(1), "every pleading subsequent to the original complaint" shall be served

on an attorney or party "by delivering a copy to him or by mailing it to him at his

last known address...." If service is made by mail, "the papers shall be deposited

in the post office addressed to the person on whom they are being served, with the postage prepaid. The service shall be deemed complete upon the third day following the day upon which they are placed in the mail...." CRLJ 5(b)(2)(i). Proof of service of all papers permitted to be mailed may be made by

written acknowledgment of service, by affidavit of the person who mailed the No. 71165-2-1/7

papers, or by certificate of an attorney. CRLJ 5(b)(2)(ii). Here, the record

contains a certified mail receipt dated August 7, 2013, and testimony from

Johnson that he mailed the claim to the post office box listed on the notice of

small claim. Upon proof of mailing, it is presumed that the mail proceeds in due

course and the letter is received by the person or entity to whom it is addressed.

Olson v. The Bon, Inc.. 144 Wn. App. 627, 634, 183 P.3d 359 (2008).

Mitchell argues that the small claims court erred by overlooking

Soundview's failure to have obtained a return receipt. But failure to make proof of

service does not affect the validity of the service, even for service of a summons

and complaint. CRLJ 4(h)(7); Jones v. Stebbins, 122 Wn.2d 471, 482, 860 P.2d

1009 (1993). Soundview has presented unrebutted evidence of mailing the

counterclaim; mere denials are insufficient to rebut the presumption of receipt.

Wash. Fed. Savings v. Klein. 177 Wn. App. 22, 28, 311, P.3d 53 (2013), review

denied, 179 Wn.2d 1019 (2014).

Furthermore, even if Mitchell were able to prove insufficient service of the

counterclaim, she cannot show that she was prejudiced. She argues that she

"could not prepare argument for court" against Soundview's argument that it

properly sanded the floor before treating it. Br. of Appellant at 13. Her claims

against Soundview, however, included breach of contract and filing of a false lien. These claims required her to prove that Soundview did not fulfill its

expectations under the contract and that it had no basis to file a lien for amounts

owed for labor performed on April 3, 2013. Mitchell was not required to provide No. 71165-2-1/8

any new or additional arguments or evidence in order to defend against the

counterclaim.

Next, Mitchell argues that the district and superior courts erred in failing to

find that Soundview had made fraudulent misrepresentations based on its work

and/or its status as a contractor. According to Mitchell, Soundview denied its

failure to properly sand the floor before treating it, and also stated that it was a

bonded contractor when it was not.

Fraudulent misrepresentation requires proof by clear, cogent, and

convincing evidence of the nine elements of fraud: (1) representation of an

existing fact; (2) materiality; (3) falsity; (4) speaker's knowledge of its falsity; (5)

intent of the speaker that it should be acted upon by the plaintiff; (6) plaintiff's

ignorance of its falsity; (7) plaintiff's reliance on the truth of the representation; (8)

plaintiff's right to rely upon it; and (9) damages suffered by the plaintiff. Stilev v.

Block, 130 Wn.2d 486, 505, 925 P.2d 194 (1996).

Mitchell argues that Soundview, via Johnson, represented that it was a

contractor and that it would do the work on the floor. She also argues that

Johnson misrepresented his own status as a contractor to the small claims court.

The record contains no evidence that Johnson or anyone represented to Mitchell

that Soundview was a licensed general contractor, only Mitchell's testimony that

Johnson told her that he was a contractor. Even if such misrepresentations had

been made, Mitchell cannot demonstrate that either Soundview's or Johnson's

status was material to the contract. The purpose of the Contractor's Registration

Act is "to afford protection to the public including all persons, firms, and

8 No. 71165-2-1/9

corporations furnishing labor, materials, or equipment to a contractor from

unreliable, fraudulent, financially irresponsible, or incompetent contractors." RCW

18.27.140. The act requires all contractors to provide the customer with proof of

registration with the Department of Labor and Industries, which includes

evidence of bonding and liability insurance. RCW 18.27.114.

Both Art and Soundview were parties to the contract with Mitchell; the

record contains undisputed evidence that Art did the work and was a licensed

and bonded contractor. Johnson was not a party to the contract. Mitchell could

therefore have filed a claim for substandard performance under the contract and

she would be protected by Art's bond. It is not required for Soundview or

Johnson to also be registered as a contractor, especially when there is no

dispute that Johnson was not a party and Soundview did not perform any work.

Mitchell argues that she spoke with Art personally and that a

representative told her that they "'had nothing to do with that contract'" and only

did the mirrors. Br. of Appellant at 14 (quoting VRP at 18). This testimony,

without more, is insufficient to establish that Soundview, not Art, performed the

work on the floors as an unlicensed contractor. The record contains a letter from

Art specifically stating that Soundview did none of the work and that Art agreed to

do the work for Mitchell as long as Soundview was involved in the billing and

customer communication. Mitchell's testimony about conversations she had with

other representatives of Art do not prove otherwise.

Mitchell also argues that Soundview committed fraud by claiming that it

properly sanded the floor. Again, the record contains no evidence that suggests No. 71165-2-1/10

that Soundview and Art failed to perform the work specified in the contract in a

workmanlike manner. Mitchell has not carried her burden of showing that

Soundview made any false representation when it claimed to have fulfilled its

obligations under the contract.

We affirm the superior court, and decline to award fees to either party on

appeal.

Affirm.

V)^Y/W/ ~j v> O - WE CONCUR: