IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
PENNY ARNESON f/k/a PENNY ARNESON SWEET, on behalf of herself DIVISION ONE personally, No. 83234-4-I Plaintiff, UNPUBLISHED OPINION PENNY ARNESON f/k/a PENNY ARNESON SWEET, on behalf of the 6708 Tolt Highlands Personal Residence Trust,
Appellant,
v.
GARY NORDLUND,
Respondent,
MFE, LLC; COLUMBIA NORTH WEST MORTGAGE; MARK D. FLYNN; L80 COLLECTIONS, LLC; ALDENTE, LLC, ROGER MAY and “JANE DOE” MAY; McGAVICK GRAVES, P.S., and DOE DEFENDANTS 1 through 20, inclusive,
Defendants.
DWYER, J. — This is the third appeal in a lawsuit involving a loan that Gary
Nordlund extended to the 6708 Tolt Highlands Personal Residence Trust (Trust).
The Trust challenges the trial court’s determination, following a bench trial, that
the Trust failed to prove that certain loan disbursements constituted usurious
interest. The Trust also seeks reversal of certain pretrial rulings. Because the
Trust does not establish an entitlement to relief, we affirm. No. 83234-4-I/2
I
The underlying facts are set forth in further detail in our opinions in
Arneson v. Nordlund (Arneson I), No. 71148-2-I (Wash. Ct. App. March 30, 2015)
(unpublished), https://www.courts.wa.gov/opinions/pdf/711482.pdf, and Arneson
v. Nordlund (Arneson II), No. 78053-1-I (Wash. Ct. App. Sept. 3, 2019)
(unpublished), https://www.courts.wa.gov/opinions/pdf/780531.pdf. We
summarize them here.
The Trust was established in 2006, with Penny Arneson and her then-
husband, Kenneth Sweet, as co-trustees. The Trust held title to Arneson and
Sweet’s family home, located at 6708 Tolt Highlands Road NE in Carnation,
Washington (the Property).
In 2009, Arneson and Sweet were in the process of dissolving their
marriage, and the family court authorized Sweet to borrow against the equity in
the Property to satisfy an existing Trust debt and to pay certain of Sweet’s
expenses. Sweet, as a co-trustee of the Trust, arranged for a $375,000 loan
from Nordlund. The loan was brokered by an individual named Mark Flynn.
Although the record does not reflect how Sweet and Flynn initially came into
contact, it does establish that Nordlund was acquainted with Flynn because their
children attended the same school. Flynn approached Nordlund, who had not
had contact with Sweet or Arneson before, about making the loan.
The loan closed on January 15, 2010, and was evidenced by a promissory
note (Note). The Trust’s obligations under the Note were secured by a deed of
trust encumbering the Property. The Note became due and payable on January
2 No. 83234-4-I/3
15, 2011. After the Trust failed to timely pay the balance on the Note, Nordlund
initiated a nonjudicial foreclosure under the deed of trust. Arneson, both
individually and on behalf of the Trust, filed this lawsuit against Nordlund,1
alleging breach of the deed of trust act,2 intentional and negligent
misrepresentation, and violation of the Consumer Protection Act (CPA),3
premised on violations of the Consumer Loan Act,4 and the usury act.5
In January 2012, the trial court granted the Trust’s request to enjoin the
foreclosure of the Property but ordered the Trust to sell the Property and deposit
the proceeds in the court registry, which the Trust did.
In November 2013, the trial court dismissed all of Arneson’s and the
Trust’s claims against Nordlund on summary judgment. The Trust appealed and,
in Arneson I, we affirmed dismissal of Arneson’s individual claims against
Nordlund because Arneson lacked standing to sue Nordlund in her individual
capacity. Arneson I, slip op. at 20. However, we reversed the dismissal of the
Trust’s CPA claim, holding that genuine issues of material fact remained as to
the underlying Consumer Loan Act and statutory usury claims. Arneson I, slip
op. at 14, 17-18.
On remand, Nordlund asserted a counterclaim against the Trust for
breach of its obligations under the Note. Nordlund also moved for summary
judgment on the Trust’s statutory usury claim. The trial court granted the motion
1 Arneson and the Trust named other defendants in their lawsuit, but their claims against
the other defendants are not at issue in this appeal. 2 Chapter 61.24 RCW. 3 Chapter 19.86 RCW. 4 Chapter 31.04 RCW. 5 Chapter 19.52 RCW.
3 No. 83234-4-I/4
on the basis that “[t]he Trust, as the debtor who is not a natural person, does not
have standing to pursue a [statutory usury] claim.”
In November 2016, the Trust filed its operative, second amended
complaint herein and added a common law action in assumpsit for recovery of
allegedly usurious interest paid under the loan.
In September 2017, Nordlund filed a motion for summary judgment on the
Trust’s remaining claims against him and on the Trust’s liability under the Note.
The trial court initially denied Nordlund’s motion, indicating that genuine issues of
material fact remained as to whether Nordlund “was in the business of making
loans” such that the Consumer Loan Act applied. However, the trial court’s order
did not address Nordlund’s motion for summary judgment as to the Trust’s
assumpsit claim or as to the Trust’s liability under the Note. Accordingly,
Nordlund moved for clarification.
In response, the Trust argued that it owed Nordlund “nothing” because
Arneson had rescinded the Note in compliance with the federal Truth In Lending
Act (TILA)6 and its implementing regulations by delivering a rescission notice to
Barbara Koval, the escrow agent who closed the loan on January 20, 2010. In a
subsequent order, the trial court granted Nordlund’s motion for clarification and
determined “that the Trust is liable to Mr. Nordlund on [the Note] as a matter of
law.” The trial court also dismissed the Trust’s assumpsit claim.
In November 2017, a jury trial was held on the Trust’s Consumer Loan Act
claim. See Arneson II, slip op. at 5. The jury found by special verdict that
6 15 U.S.C. § 1601 et seq.
4 No. 83234-4-I/5
Nordlund was not “engaged in the business of making qualified secured or
unsecured loans of money in January 2010,” thus vitiating the Trust’s Consumer
Loan Act claim and, consequently, its CPA claim. Arneson II, slip op. at 6. The
trial court entered judgment on the verdict and dismissed the Trust’s claims
against Nordlund with prejudice.
The Trust again appealed. It assigned error to (1) the trial court’s
dismissal of the Trust’s statutory usury claim, (2) the trial court’s dismissal of the
Trust’s assumpsit claim, and (3) a jury instruction related to the Trust’s Consumer
Loan Act claim. The Trust did not, however, assign error to the trial court’s
determination that the Trust was liable on the Note as a matter of law.
Additionally, the Trust asserted that it “never disputed the existence of a debt”
and, in response to apparent confusion on Nordlund’s part as to the Trust’s
position with regard to the existence of a debt, the Trust represented that,
although it had relied below on federal law to argue that the Note had been
rescinded, “the issue was not plead[ed].”
In Arneson II, we held that the trial court did not err in instructing the jury
and thus affirmed the dismissal of the Trust’s Consumer Loan Act and CPA
claims. Slip op. at 17-18. However, we reversed the trial court’s dismissal of the
Trust’s assumpsit and statutory usury claims. Arneson II, slip op. at 11-13.
On remand from Arneson II, the Trust moved for summary judgment on its
assumpsit claim, arguing that it had established each element of assumpsit as a
matter of law. The Trust argued, with regard to the first element, i.e., the
5 No. 83234-4-I/6
existence of a loan or forbearance,7 that “there is no credible evidence adduced
to date – either through discovery or trial – to dispute the existence of a ‘loan or
forbearance.’” Nordlund, for his part, moved for summary judgment dismissal of
the Trust’s statutory usury claim, renewing an earlier argument—which the trial
court did not reach in initially dismissing this claim—that the claim was time
barred.
In response to Nordlund’s motion, the Trust filed a “Motion for Summary
Judgment (Rescission) and Memorandum in Opposition to Gary Nordlund’s
Motion for Partial Summary Judgment (Statute of Limitations)”8 (Rescission
Motion), arguing that it had no liability whatsoever under the Note because it had
rescinded the loan pursuant to TILA. Nordlund moved to strike the Rescission
Motion and for CR 11 sanctions, arguing that the “the Trust has already been
found liable under the . . . Note as a matter of law,” and “[t]he opportunity to claim
that the Trust is not liable under the loan passed when the Trust failed to appeal
this legal determination.” Nordlund also argued that the Trust was judicially
estopped from raising a rescission claim given its earlier representations that it
never disputed the existence of a debt, that it did not plead rescission, and that
no credible evidence had been adduced to dispute the existence of a loan.
The trial court declined to strike the Rescission Motion but, relying on
judicial estoppel, declined to reach the merits of the Trust’s rescission claim. The
trial court also granted Nordlund’s motion for sanctions and ordered the Trust
7 See Flannery v. Bishop, 81 Wn.2d 696, 698, 504 P.2d 778 (1972) (setting forth the
elements of an assumpsit claim). 8 Some capitalization omitted.
6 No. 83234-4-I/7
and its counsel, jointly and severally, to pay Nordlund’s reasonable attorney fees
and costs incurred in responding to the Rescission Motion.9 Meanwhile, the trial
court granted Nordlund’s motion for summary judgment on the Trust’s statutory
usury claim. The trial court also partially granted the Trust’s motion for summary
judgment as to its assumpsit claim. As a result of these orders, the only issues
left for trial were whether Nordlund exacted more under the loan than was
allowed by law, and if so, the amount due to the Trust in assumpsit.
Before trial, Nordlund moved in limine to exclude any evidence of
consequential damages allegedly resulting from the court-ordered sale of the
Property. Nordlund pointed out that, in its trial brief, the Trust asserted it was
entitled to all damages proximately resulting from “Nordlund’s unlawful lending
behavior,” including damages that the Trust allegedly incurred by selling the
Property at a substantial loss. The trial court granted Nordlund’s motion and a
bench trial was held in June 2021. The only witnesses were Nordlund, Arneson,
Koval, and Arneson’s current husband.
The trial court entered detailed findings of fact and conclusions of law in
August 2021. As is relevant to this appeal, the trial court determined that the
Trust failed to establish all elements of its assumpsit claim with regard to the
following four loan disbursements, which the Trust had alleged constituted
usurious interest: (1) a $3,452.06 disbursement to Nordlund, (2) a $7,995
“Processing Fee” disbursed to an entity called “Columbia Northwest Mortgage”
9 The trial court also ordered the Trust’s counsel, individually, to pay $10,000 to the King
County Bar Foundation. The Trust’s counsel did not appeal and therefore only the sanctions payable jointly and severally by the Trust are before us.
7 No. 83234-4-I/8
(Columbia), (3) a $45,000 “Mortgage Broker Fee” disbursed to an entity called
“MFE LLC” (MFE), and (4) an $8,742.83 disbursement to an entity called “L80
Collections.” The trial court subsequently entered judgment in Nordlund’s favor.
The Trust appeals.
II
The Trust argues that the trial court erred when it excluded evidence of
consequential damages related to the Trust’s sale of the Property. This is so, the
Trust asserts, because according to the Trust, our Supreme Court in Lee v.
Hillman, 74 Wash. 408, 133 P. 583 (1913), “acknowledged the existence and
availability of consequential damages as a remedy under the doctrine of
assumpsit if the same is directly and proximately related to the exaction of
[usurious] interest.” Br. of Appellant at 46. The Trust is mistaken.
“The right to recover usury paid is a common-law right; the remedy is in
assumpsit for money had and received.” Edwards v. Surety Fin. Co. of Seattle,
176 Wash. 534, 536, 30 P.2d 225 (1934) (emphasis added). In Lee, our
Supreme Court merely held that this common law remedy was not supplanted by
a statutory cause of action for usury, which allowed recovery of treble damages
but was subject to a one-year limitations period. 74 Wash. at 415. Lee did not
hold that a plaintiff alleging a common law action for assumpsit could recover
anything more than “the excess actually paid” in usurious interest, whether that
excess was paid in money or other property. 74 Wash. at 415-16. To the
contrary, the court expressly declined to consider that question. See Lee, 74
Wash. at 417 (“The question of appellant’s right to recover in this action more
8 No. 83234-4-I/9
than the excess so paid by him above the highest rate allowed by our usury
statute is not presented in the briefs of counsel, so we leave that question for
future examination.”). Neither Lee nor the other two cases the Trust cites
support the Trust’s assertion that consequential damages are available in a
common law action in assumpsit for recovery of usurious interest payments. See
Hopgood v. Miller, 107 Wash. 449, 452, 181 P. 919 (1919) (holding that, by
deeding a mortgaged property to the lender in satisfaction of the debt, borrower
did not waive his right “to recover back the usurious interest or payments exacted
from him” (emphasis added)); Flannery v. Bishop, 81 Wn.2d 696, 700, 504 P.2d
778 (1972) (acknowledging the existence of a common law action “‘to recover the
money or property unlawfully taken . . . in payment of usurious interest’”
(emphasis added) (quoting Lee, 74 Wash. at 416)). Accordingly, the Trust does
not establish that the trial court erred in excluding evidence of consequential
damages associated with the sale of the Property.
III
The Trust next argues that the trial court erred in failing to characterize the
challenged loan disbursements as usurious interest.10 We disagree.
10 In addition to challenging the trial court’s characterization of certain loan
disbursements, the Trust also assigns error to a number of the trial court’s specific findings of fact and conclusions of law. But instead of supporting these assignments of error with argument and authority as required by RAP 10.3(a)(6), the Trust attempts to incorporate the arguments from a motion for reconsideration filed in the trial court. We do not consider these arguments. See Holland v. City of Tacoma, 90 Wn. App. 533, 538, 954 P.2d 290 (1998) (“[T]rial court briefs cannot be incorporated into appellate briefs by reference.”). Nor do we consider the Trust’s belated attempt to argue its assignments of error in its reply. See Neighbors of Black Nugget Rd. v. King County, 88 Wn. App. 773, 780, 946 P.2d 1188 (1997) (declining to consider argument raised for the first time in a reply brief). The Trust’s specific assignments of error are waived. See Puget Sound Bank v. Richardson, 54 Wn. App. 295, 298, 773 P.2d 429 (1989) (“Assignments of error unsupported by argument or authority are deemed waived.”).
9 No. 83234-4-I/10
“In a bench trial where the trial court has weighed the evidence, our review
is limited to determining whether substantial evidence supports the trial court’s
findings of fact and whether those findings support the court’s conclusions of
law.” Newport Yacht Basin Ass’n of Condo. Owners v. Supreme Nw., Inc., 168
Wn. App. 56, 63, 277 P.3d 18 (2012). “Substantial evidence is a quantum of
evidence sufficient to persuade a rational fair-minded person that the premise is
true.” Newport Yacht Basin Ass’n, 168 Wn. App. at 63-64. In conducting our
review, we view the evidence and draw reasonable inferences therefrom in the
light most favorable to the party that prevailed below—here, Nordlund. Scott’s
Excavating Vancouver, LLC v. Winlock Props., LLC, 176 Wn. App. 335, 342, 308
P.3d 791 (2013). We review the trial court’s conclusions of law de novo. Scott’s
Excavating, 176 Wn. App. at 342.
To prevail on its claim for assumpsit, the Trust had to prove: (1) the
existence of a loan “of money, or of something circulating as such,” (2) “an
understanding between the parties that the principal shall be repayable
absolutely,” (3) “the exaction of a greater profit than is allowed by law,” and
(4) “an intention to violate the law.” Flannery, 81 Wn.2d at 698.
Here, the latter two elements were the only elements disputed at trial. The
trial court found, with regard to the $3,452.06 disbursed to Nordlund, that this
disbursement constituted interest in an amount greater than that allowed by law.
However, the trial court also found that Nordlund “did not intentionally violate the
law” by receiving the disbursement. The Trust does not address this latter
finding in its opening brief, much less show that it was not supported by
10 No. 83234-4-I/11
substantial evidence. Instead, the Trust asserts, incorrectly, that the trial court
found that the disbursement to Nordlund “should not be characterized as
‘interest.’” Br. of Appellant at 49. Accordingly, the Trust does not establish an
entitlement to appellate relief as to the trial court’s determination that the Trust
was not entitled to recovery in assumpsit for the disbursement to Nordlund.
Furthermore, the trial court’s determination was supported by substantial
evidence. Nordlund testified that his intent with regard to the loan was to charge
12 percent interest. Consistent with this intent, Nordlund testified that he signed
a term sheet that Flynn had prepared indicating that the loan would bear interest
at 12 percent. Nordlund testified that he at no point provided Flynn with any
additional instructions with regard to the loan. Nordlund testified that at some
point after the loan closed, he received a check in the amount of $3,452.06. He
also testified that he was surprised to receive the check because he was not
expecting it, so he called Flynn, who explained that the check was for interest
from the time Nordlund deposited the funds into escrow until closing. Nordlund
testified that prior to receiving the check, it had not occurred to him that he would
be entitled to preclosing interest. A reasonable inference from Nordlund’s
testimony is that in depositing the unexpected check, Nordlund collected
additional interest mistakenly and did not intentionally violate the law by doing so.
See Metro Hauling, Inc. v. Daffern, 44 Wn. App. 719, 721, 723 P.2d 32 (1986)
(although plaintiff alleging usury need not establish “intent of a culpable nature,”
plaintiff still must “prove that [the defendant] intentionally, rather than mistakenly
or inadvertently, extracted the excessive interest”).
11 No. 83234-4-I/12
With regard to the processing fee and mortgage broker’s fee disbursed to
Columbia and MFE, respectively, the trial court determined that the Trust failed to
sustain its burden to show that either of these fees “represented additional
interest or was not a reasonable fee for services rendered.” This determination is
also supported by substantial evidence. Both Arneson and Sweet, as the
borrower’s co-trustees, signed a settlement statement confirming that each had
“carefully reviewed the HUD-1 Settlement Statement and to the best of my
knowledge and belief, it is a true and accurate statement of all receipts an[d]
disbursements made on my account or by me in this transaction.” The
disbursements listed in the settlement statement included the disbursements to
Columbia and MFE, which Nordlund testified he himself did not receive.
Additionally, Koval, the escrow officer, testified that she had worked in the
escrow business for 42 years, had owned her escrow company for 25 years, and
had customarily worked with borrowers and mortgage brokers. Koval testified
that it was customary to make disbursements for both a broker fee and for a
processing fee. Koval testified that the services mortgage brokers typically
provide consist of “[f]inding a loan for a borrower that fit[s] their needs,” and that
the borrower typically pays for the mortgage broker’s services. Koval also
testified that although the broker’s fee in a conventional loan was typically only
one to two percent of the loan, she had not worked on very many “hard-money”
loans like the subject loan. But she testified that she had a sense the broker’s
fee for such a loan would be higher because the borrower “can’t get a
conventional loan maybe, and so there’s a lot more work on finding a lender.”
12 No. 83234-4-I/13
Meanwhile, Arneson testified that she did not know what services MFE
and Columbia provided. But she also testified that she had not had any direct
contact with Sweet since February 2009, she did not communicate with him
about who he was working with on the loan, she did not know whether Sweet
reached out to Flynn or how they came into contact, and she did not have any
direct contact with Flynn about the loan. And although it is undisputed that
Columbia and MFE were both Flynn’s companies, Arneson did not present any
testimony from Flynn to show that these companies did not provide services
related to the loan or any evidence that their fees were unreasonable.
Given the evidence that the Trust expressly approved the settlement
statement showing the disbursements to Columbia and MFE, the evidence that
Nordlund was not the recipient of those disbursements, the evidence that
disbursements to mortgage brokers and loan processors are customary, the
reasonable inference that Sweet—not Arneson—was the Trust’s representative
primarily involved in working with Flynn on the loan, and the absence of any
testimony from Sweet, Flynn, or any representative from Columbia or MFE as to
the services those companies did or did not provide, the trial court did not err by
determining that the Trust failed to show that the fees disbursed to Columbia and
MFE constituted usurious interest as opposed to a reasonable fee for services
actually performed for the Trust. Cf. Sparkman & McLean Income Fund v. Wald,
10 Wn. App. 765, 768-69, 520 P.2d 173 (1974) (holding that the trial court did not
err in characterizing a loan fee as interest where the borrower presented expert
testimony that the fee’s recipient “performed no services other than those for the
13 No. 83234-4-I/14
benefit of the lender which are normally incident to such a transaction” and there
was “no evidence” that the borrower approved the fee); Aetna Fin. Co. v. Darwin,
38 Wn. App. 921, 926 n.5, 691 P.2d 581 (1984) (though not dispositive, evidence
that services were obtained by payment to a third party, as opposed to the
lender, “is evidence the services were actually provided to the borrower and were
reasonably worth the amount charged”).
The trial court also did not err in determining, with regard to the $8,742.83
disbursement to L80 Collections, that “[t]he Trust did not carry its burden of
establishing that the disbursement to L80 Collections represents a fee to the
lender or interest.” In addition to the evidence already described, Nordlund
testified that he did not receive any proceeds from L80 Collections and did not
know what its involvement was with the loan or why it would have received a
disbursement. Koval testified that it was “normal” to make disbursements from
escrow to third parties for debts that had not yet been reduced to judgment.
Also, L80 Collections was listed in the settlement statement together with other
creditors of Sweet’s who were paid from the proceeds of the Nordlund loan. In
addition, Arneson herself testified that the proceeds of the Nordlund loan were
used in part to pay Sweet’s personal debts. A reasonable inference from the
evidence is that L80 Collections was another of Sweet’s creditors who was paid
from the proceeds of the loan. The trial court did not err in determining that the
Trust failed to show otherwise.
The Trust contends that the trial court’s determinations were in error
because, it asserts, “the burden to prove that specific loan fees were incurred for
14 No. 83234-4-I/15
some loan related service is on the lender – not the borrower.” Br. of Appellant
at 50. The Trust is incorrect: “[T]he burden of proof is upon him who asserts that
the transaction is usurious.” McCall v. Smith, 184 Wash. 615, 622, 52 P.2d 338
(1935). And while the Trust cites Sparkman & McLean and McGovern v. Smith,
59 Wn. App. 721, 801 P.2d 250 (1990), in support of its assertion, neither of
these cases holds that the burden lies with the lender to show that a particular
fee was in fact incurred for a loan-related service. See Sparkman & McLean, 10
Wn. App. at 769 (holding that trial court’s characterization of fee as interest was
supported by substantial evidence and, thus, would not be disturbed on appeal);
McGovern, 59 Wn. App. at 730 (where loan is “usurious on its face,”11 burden of
establishing exemption from usury laws lies with lender).
The Trust also argues that the trial court erred in its characterization of the
above loan disbursements because there was evidence that the escrow
instructions were “submitted to escrow by Mr. Nordlund’s agent, Mark Flynn, on
Mr. Nordlund’s behalf”; Koval testified that she did not receive any documentation
to support the disbursements to Columbia, MFE, and L80 Collections even
though she requested it; the fact that Arneson signed the settlement statement
reflecting these disbursements was “of limited relevance”; and there was “no
11 The Trust asserts throughout its reply brief that the Nordlund loan was usurious on its
face. But the Trust does not support this assertion with any analysis whatsoever, much less explain why the loan was usurious on its face given that the interest rate shown on the Note is 12 percent per annum, with a default rate of 18 percent per annum “OR the maximum rate allowed by law, whichever is less.” Cf. Aetna, 38 Wn. App. at 923 (loan of $51,000 at 20.58 percent interest was “usurious on its face” because “each of the elements of usury appears on the face of the loan contract”). The Trust’s conclusory assertion, made for the first time in its reply brief, does not warrant consideration. See Norcon Builders, LLC v. GMP Homes VG, LLC, 161 Wn. App. 474, 486, 254 P.3d 835 (2011) (appellate court “will not consider an inadequately briefed argument”).
15 No. 83234-4-I/16
evidence that the Trust ever approved [the] loan fees” beyond the signed
settlement statement. Br. of Appellant at 50-51. But in a substantial evidence
review, “[w]e . . . defer to the trial court on issues of conflicting evidence, witness
credibility, and persuasiveness of the evidence.” Scott’s Excavating, 176 Wn.
App. at 342 (emphasis added). The Trust asks us to reweigh the evidence,
which we will not do.
IV
The Trust next contends that the trial court “erred in entering judgment
without a thorough and comprehensive accounting of the loan.” Br. of Appellant
at 52. This is so, the Trust asserts, because the amount of the judgment
“necessarily includes loan fee disbursement that can only be characterized as
interest as argued above.” Br. of Appellant at 53. In other words, the Trust’s
challenge to the trial court’s judgment is premised on the Trust’s assertion that
the trial court erred in its characterization of the loan fees discussed in the
previous section. Having rejected that assertion, we also reject the Trust’s
contention that the trial court’s judgment was in error.
V
The Trust next avers that “[t]he trial court dismissed the Trust’s rescission
claim on summary judgment.” Br. of Appellant at 23. The Trust argues that
because Arneson timely rescinded the loan, “[t]he trial court’s dismissal of the
Trust’s rescission claim on summary judgment was erroneous and should be
reversed.” Br. of Appellant at 38.
The Trust’s argument misstates the record. The trial court did not
16 No. 83234-4-I/17
summarily dismiss any rescission claim. Instead, upon remand after the Trust’s
second appeal, the trial court expressly declined to reach the merits of the Trust’s
rescission claim in light of its earlier determination that the Trust was liable under
the Note—a determination whereby the trial court necessarily rejected the Trust’s
argument that it rescinded the Note.12 Because the trial court did not revisit this
determination on remand, neither it—nor the Trust’s rescission theory—is
properly before us in this appeal.
As the Trust itself has recognized throughout this litigation, under the law
of the case doctrine, “[q]uestions determined on appeal, or which might have
been determined had they been presented, will not again be considered on a
subsequent appeal in the same case, if there is no substantial change in the
evidence at a second determination of the cause.” Clark v. Fowler, 61 Wn.2d
211, 213, 377 P.2d 998 (1963) (emphasis added).
RAP 2.5(c) makes the law of the case doctrine discretionary. State v.
Mannhalt, 68 Wn. App. 757, 762-63, 845 P.2d 1023 (1992). That rule provides,
as relevant here, “If a trial court decision is otherwise properly before the
appellate court, the appellate court may at the instance of a party review and
determine the propriety of a decision of the trial court even though a similar
decision was not disputed in an earlier review of the same case.” RAP 2.5(c)(1).
RAP 2.5(c)(1) does not, however, “revive automatically every issue or decision
12 The Trust claims that the trial court did not adjudicate the Trust’s rescission theory in
2017 because the trial court’s order “makes no reference to the Trust’s rescission claim whatsoever.” Br. of Appellant at 28. But by concluding that the Trust was liable on the Note as a matter of law, the trial court necessarily rejected the Trust’s argument that it rescinded the Note, which the Trust briefed to the trial court before entry of the order.
17 No. 83234-4-I/18
which was not raised in an earlier appeal.” State v. Barberio, 121 Wn.2d 48, 50,
846 P.2d 519 (1993). “Only if the trial court, on remand, exercised its
independent judgment, reviewed and ruled again on such issue does it become
an appealable question.” Barberio, 121 Wn.2d at 50 (emphasis added).
Though not cited by the parties, Barberio is instructive here. In Barberio,
the defendant was convicted of two offenses and received an exceptional
sentence for each. 121 Wn.2d at 49. The defendant appealed both convictions,
but he did not assign error to the resulting sentences. Barberio, 121 Wn.2d at
49. We reversed one of the convictions and remanded for resentencing.
Barberio, 121 Wn.2d at 49.
On remand, the defendant argued that the elimination of one of the
convictions mandated a proportionate reduction in the sentence for the other.
Barberio, 121 Wn.2d at 49-50. The trial court declined to revisit the sentence for
the remaining conviction, observing that “‘nothing has changed with regard to
[the remaining count] since the matter was sentenced before’” and “‘[t]here’s
nothing in the Court of Appeals decision that I see that impacts [the remaining
count].’” Barberio, 121 Wn.2d at 51-52. The defendant again appealed, and we
dismissed the appeal because the defendant had not challenged his sentences
in his first appeal. Barberio, 121 Wn.2d at 50.
Our Supreme Court affirmed. Barberio, 121 Wn.2d at 52. In doing so, it
explained that because the trial court made clear that it “was not considering
anew its prior exceptional sentence as to the count which was affirmed,” the trial
court did not exercise independent judgment on remand as to the sentencing
18 No. 83234-4-I/19
issue. Barberio, 121 Wn.2d at 51. The Supreme Court also observed that the
sentencing issue “was a clear and obvious issue which could have been decided
in . . . the first appeal,” and because the defendant had not raised it in his first
appeal, “[i]nstead of a timely and orderly proceeding to determine the matter on
the merits,” the respondent, the Court of Appeals, the Supreme Court, and their
respective staff “have had to deal with a procedural morass, all of which could
have been avoided had the matter been raised when it should have been in the
first appeal.” Barberio, 121 Wn.2d at 52.
Here, as in Barberio, the issue of the Trust’s liability on the Note and, thus,
the issue of whether the Trust effectively rescinded the Note, were clear and
obvious issues that could have been decided in the Trust’s second appeal had
the Trust timely raised them. But the Trust did not. To the contrary, the Trust
represented in its second appeal that it “never disputed the existence of a debt”
and, in attempting to quell confusion as to the Trust’s position with regard to the
existence of a debt, the Trust represented without reservation that rescission had
not been pleaded.
Furthermore, as with our opinion in the Barberio defendant’s first appeal,
our opinion in Arneson II did not change anything about the trial court’s
determination that the Trust was liable under the Note as a matter of law:
Although we reversed the trial court’s dismissal of the Trust’s assumpsit and
statutory usury claims, we did not address, much less reverse, the trial court’s
determination of the Trust’s liability under the Note.
Also, as in Barberio, the trial court did not exercise independent judgment
19 No. 83234-4-I/20
on remand as to the issue the Trust now attempts to raise. Instead, the trial court
made clear, as did the trial court in Barberio, that it would not be revisiting the
matter, relying on judicial estoppel. To this end, as Nordlund points out, the Trust
does not challenge the trial court’s application of judicial estoppel.13 Hence, the
Trust does not show any abuse of discretion in the trial court’s refusal to revisit its
liability determination. Cf. Harris v. Fortin, 183 Wn. App. 522, 526-27, 333 P.3d
556 (2014) (trial court’s decision to apply judicial estoppel is reviewed for abuse
of discretion).
Finally, as in Barberio, the Trust’s decision not to challenge the trial court’s
liability determination in its second appeal has caused Nordlund, the trial court,
and this court to have to deal with a procedural morass that could have been
avoided had the Trust timely raised the issue. And, the Trust, whose briefing on
appeal leaves several questions unanswered with regard to TILA’s applicability
and Arneson’s compliance therewith,14 shows neither that the trial court clearly
erred in rejecting the Trust’s rescission theory nor that declining to review the
matter at this late stage would work a manifest injustice on the Trust with no
corresponding injustice to Nordlund. Cf. State v. Worl, 129 Wn.2d 416, 424, 918
13 The Trust attempts to do so for the first time in its reply brief, but as discussed, we do
not consider arguments raised for the first time in a reply brief. 14 For example, the Trust does not address whether Nordlund, who was found by a jury
not to be engaged in the business of making loans, qualifies as a “creditor” under TILA’s implementing regulations. See 12 C.F.R. § 226.2(a)(17) (defining “creditor”). The Trust also provides no legal analysis to explain how Arneson, who was only one of the Trust’s two co- trustees, could effect a rescission on the Trust’s behalf. And although the Trust cites 12 C.F.R. § 226.23(a)(2) for the proposition that Arneson properly served the rescission notice by delivering it to Koval, who transmitted it to Flynn, whom the Trust asserts was Nordlund’s agent, the Trust cites no authority to support its assertion that such notice complies with the cited regulation, which provides that “[t]o exercise the right to rescind, the consumer shall notify the creditor” and that notice is “considered given when mailed, when filed for telegraphic transmission or, if sent by other means, when delivered to the creditor’s designated place of business.” (Emphasis added.)
20 No. 83234-4-I/21
P.2d 905 (1996) (appellate court may decline to apply law of the case doctrine
where earlier decision was clearly erroneous and application of the doctrine
“‘would work a manifest injustice to one party, whereas no corresponding
injustice would result to the other party’” (quoting Greene v. Rothschild, 68 Wn.2d
1, 10, 414 P.2d 1013 (1966))). For the foregoing reasons, we, like the Supreme
Court in Barberio, decline to review the trial court’s determination that the Trust
was liable on the Note as a matter of law, “[i]n the interest of judicial economy,
already too much wasted.” Barberio, 121 Wn.2d at 52.
VI
The Trust next argues that the trial court erred by imposing CR 11
sanctions against it. We disagree.
CR 11 provides that a party or attorney’s signature on a motion constitutes
a certification “that to the best of the party’s or attorney’s knowledge, information,
and belief, formed after an inquiry reasonable under the circumstances,” the
motion “is well grounded in fact” and “is not interposed for any improper purpose,
such as to harass or to cause unnecessary delay or needless increase in the
cost of litigation.” CR 11(a). If a motion is signed in violation of CR 11, “the
court . . . may impose upon the person who signed it, a represented party, or
both, an appropriate sanction,” including reasonable attorney fees and costs
incurred because of the filing of the motion. CR 11(a).
We review a trial court’s decision on CR 11 sanctions for abuse of
discretion. Clare v. Telquist McMillen Clare PLLC, 20 Wn. App. 2d 671, 681, 501
P.3d 167 (2021). “The trial court abuses its discretion when its exercise of
21 No. 83234-4-I/22
discretion is manifestly unreasonable or based on untenable grounds or
reasons.” Workman v. Klinkenberg, 6 Wn. App. 2d 291, 298, 430 P.3d 716
(2018). In evaluating the trial court’s exercise of discretion, we are mindful that
the trial court “‘has tasted the flavor of the litigation’” and, thus, is best positioned
to determine whether sanctions are warranted. Miller v. Badgley, 51 Wn. App.
285, 300, 753 P.2d 530 (1988) (quoting Westmoreland v. CBS, Inc., 770 F.2d
1168, 1174 (D.C. Cir. 1985)).
Here, the trial court had tenable grounds for imposing CR 11 sanctions.
Contrary to the Trust’s assertions that the trial court failed to explain its
reasoning, the court found that the Trust, through counsel, made “many
contradictory statements” in this litigation related to whether it intended to pursue
its rescission theory and whether that theory was supported by the evidence.
Additionally, the trial court offered the Trust an opportunity to withdraw the
Rescission Motion before oral argument, but the Trust elected to proceed despite
Nordlund’s pending CR 11 sanctions motion describing these contradictory
statements. Specifically, as the trial court found and as discussed above, the
Trust represented to this court in its second appeal that it never disputed the
existence of a debt and that the issue of rescission was not pleaded. The trial
court also noted that on remand from Arneson II, the Trust asserted further that
there was “no credible evidence adduced to date – either through discovery or
trial – to dispute the existence of a ‘loan or forbearance.’” These representations
and assertions by the Trust, which gave no indication it was reserving with regard
to its rescission theory, strongly implied that the Trust did not intend to pursue
22 No. 83234-4-I/23
rescission. Indeed, as previously discussed, the Trust’s statement that
rescission was “not plead[ed]” was intended to dispel “Nordlund’s confusion as to
the Trust’s position with regard to the existence of a debt.”
Yet when Nordlund moved for summary dismissal of the Trust’s statutory
usury claim on the basis that it was time barred, the Trust’s only response was
that it had no liability under the Note because it had rescinded it—contrary to its
earlier representations that it was not disputing the existence of a debt. Under
the circumstances, the trial court did not abuse its discretion by concluding that
the Rescission Motion was not well grounded in fact and was brought “for the
improper purpose of promoting gamesmanship and needless litigation.”
To be clear, we do not suggest that a party may not plead alternative,
inconsistent theories, and CR 8(e)(2) expressly allows a party to “state as many
separate claims or defenses as the party has regardless of consistency.” But it is
one thing to plead alternative theories and another to make representations to
the court and other parties implying that no evidence actually supports a theory
and that it will not be pursued—only to attempt to resuscitate it later.
The Trust argues that CR 11 sanctions were not warranted because
(1) the Trust pleaded rescission in its second amended complaint, (2) the trial
court’s October 2017 order did not adjudicate the Trust’s rescission claim, and
(3) because we reversed the October 2017 order in Arneson II, the order “had no
precedential or estoppel value as to the Trust’s pursuit of its rescission claim
going forward.” Br. of Appellant at 41. These arguments misunderstand the
basis of the trial court’s sanctions award, i.e., the Trust’s conflicting
23 No. 83234-4-I/24
representations about what it pleaded and whether it intended to pursue its
rescission claim. Whether, in the absence of those representations, the Trust
actually pleaded rescission or the trial court adjudicated the claim is irrelevant.
Similarly, the trial court’s basis for imposing sanctions was not the estoppel effect
of its October 2017 order (the relevant part of which was not reversed by
Arneson II), but the estoppel effect of the Trust’s own representations throughout
this litigation.
The Trust also complains that the trial court “failed to inquire of counsel
what efforts were made to investigat[e] the facts and law.” Br. of Appellant at 41.
But the Trust does not explain what any such inquiry might have revealed in the
way of justification for counsel’s contradictory representations, much less
persuade us that any such inquiry is necessary where the basis for sanctions is a
party’s contradictory representations, through counsel, about whether it intends
to pursue a particular theory.
Finally, the Trust contends that the CR 11 sanctions must be reversed
because the trial court “offered no warning as to the consequences it was
considering if the Trust moved forward” with the Rescission Motion instead of
withdrawing it. Br. of Appellant at 42. But the hearing at which the trial court
considered the Rescission Motion was the same hearing at which the trial court
would also consider Nordlund’s motion for CR 11 sanctions, which at that point
had been fully briefed and wherein Nordlund expressly requested sanctions in
the form of costs and fees incurred as a result of the Rescission Motion. The
Trust does not establish that any additional “warning” was required under the
24 No. 83234-4-I/25
circumstances.
VII
Both parties request an award of attorney fees on appeal. Because the
Trust is not the prevailing party on appeal, we deny its request for fees on
appeal.
Nordlund argues that this court should award him fees because the Trust’s
appeal is “intransigent and frivolous.” Br. of Resp’t at 65. “‘An appeal is frivolous
if there are no debatable issues upon which reasonable minds might differ, and it
is so totally devoid of merit that there was no reasonable possibility of success.’”
Legal v. Monroe Sch. Dist., 4 Wn. App. 2d 776, 788, 423 P.3d 915 (2018)
(internal quotation marks omitted) (quoting West v. Thurston County, 169 Wn.
App. 862, 868, 282 P.3d 1150 (2012)). RAP 18.9(a) vests this court with
discretion to award attorney fees as a sanction for filing a frivolous appeal. Stiles
v. Kearney, 168 Wn. App. 250, 267, 277 P.3d 9 (2012). Intransigence may be
demonstrated by “‘litigious behavior, bringing excessive motions, or discovery
abuses’” and has served as an independent basis for awarding fees on appeal.
In re Marriage of Larson, 178 Wn. App. 133, 146, 313 P.3d 1228 (2013) (quoting
In re Marriage of Wallace, 111 Wn. App. 697, 710, 45 P.3d 1131 (2002)).
Although we reject the Trust’s claims on appeal, we are unpersuaded that
the Trust’s appeal is frivolous or intransigent. Accordingly, we decline to award
fees on these bases.
That said, with regard to the Trust’s challenge to the CR 11 sanctions
award, it would defeat the purpose of that award to force Nordlund to pay
25 No. 83234-4-I/26
additional litigation expenses to defend the award on appeal. See Wash. State
Physicians Ins. Exch. & Ass’n v. Fisons Corp., 122 Wn.2d 299, 356, 858 P.2d
1054 (1993) (fees awarded as sanctions “should insure that the wrongdoer does
not profit from the wrong”). Accordingly, subject to his compliance with RAP
18.1, we grant Nordlund’s request for fees on appeal solely to the extent they
were incurred in defending the trial court’s CR 11 sanctions award. Cf. Andren v.
Dake, 14 Wn. App. 2d 296, 322, 472 P.3d 1013 (2020) (awarding appellate fees
to party who successfully defended sanctions award on appeal “[t]o avoid
incentivizing sanctioned parties from appealing in order to exhaust the benefit of
any sanctions award granted by the trial court to their aggrieved opponent”).
Affirmed.
WE CONCUR: