Shamim Mohandessi And Joseph Grace, Apps/cross-res. v. Urban Venture, Llc, Res/cross-apps.

459 P.3d 407, 12 Wash. App. 2d 625

• Court: Court of Appeals of Washington
• Decided: March 9, 2020
• Docket: 77017-9
• Status: Published

Opinion

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

SHAMIM MOHANDESSI; JOSEPH, ) No. 77017-9-I consolidated with GRACE, individually as residential ) No. 77581-2-I owners and derivatively on behalf of ) 2200 RESIDENTIAL ASSOCIATION, ) a Washington non-profit corporation, ) and derivatively on behalf of 2200 ) DIVISION ONE CONDOMINIUM ASSOCIATION, a ) Washington non-profit corporation, ) Appellants, ) v. ) URBAN VENTURE LLC, a Washington ) limited liability company; VULCAN, INC.,) a Washington corporation; 2200 ) CONDOMINIUM ASSOCIATION, a ) Washington non-profit corporation; ) 2200 RESIDENTIAL ASSOCIATION, a ) Washington non-profit corporation; ) GARY ZAK, an individual, BRIAN ) CROWE, an individual; BRANDON ) MORGAN, an individual; and JOHN ) DOES 1-15, individuals or entities, ) PUBLISHED OPINION

Respondents. ) FILED: March 9, 2020 __________________________________________________________________________________)

MANN, A.C.J.—This case concerns condominium assessments. Shamim

Mohandessi and Joseph Grace (collectively plaintiffs) appeal the trial court’s dismissal No. 77017-9-1/2

of their claims against the 2200 Residential Association (RA), the 2200 Condominium

Association, Gary Zak, Brian Crowe, and Brandon Morgan (collectively MA), Urban

Venture LLC, and Vulcan, Inc., (all collectively defendants). The plaintiffs brought direct

and derivative claims alleging that the defendants violated the Washington

Condominium Act (Condominium Act), chapter 64.34 RCW, the Washington Consumer

Protection Act (CPA), chapter 19.86 RCW, breached statutory and fiduciary duties, and

tortiously interfered with the MA Board’s duties.

The plaintiffs contend that the trial court erred in (1) concluding that the statute of

limitations barred their claims, (2) concluding that they could not bring claims

derivatively on behalf of the RA and MA, (3) concluding that they lacked standing to

bring claims against the MA for violations of the Condominium Act, (4) dismissing their

breach of contract claims against the RA, (5) sua sponte dismissing their claim that a

prior 2012 settlement agreement was void as the product of fraud and collusion, (6)

awarding fees under the 2012 settlement agreement and costs under the Uniform

Declaratory Judgment Act, RCW 7.24.100. The defendants cross appeal and argue

that the trial court erred: (1) in concluding that the common expense liability allocation in

the master declaration violates the Condominium Act, RCW 64.34.224(1) and (2) in not

awarding their full attorney fees under the 2012 settlement agreement, or alternatively,

under the Condominium Act.

We affirm the trial court’s dismissal of all claims against the RA, Urban Venture,

and Vulcan. We affirm the trial court’s conclusion that the master declaration violated

the Condominium Act because the allocation of common expenses violates RCW

-2- No. 77017-9-1/3

64.34.224(1). We reverse the trial courts dismissal of the plaintiffs’ claims against the

MA for violations of the Condominium Act.

We affirm the trial court’s award of attorney fees under the 2012 settlement

agreement in favor of the RA, Urban Venture, and Vulcan. We vacate the award of

attorney fees in favor of the MA.

Affirmed in part, reversed in part.

2200 Westlake

This appeal concerns a mixed-use development located at 2200 Westlake

Avenue in downtown Seattle (2200 Westlake) comprising of over 500,000 gross square

feet, excluding underground parking. Milliken Urban Limited Partnership (Milliken)

began the development of 2200 Westlake. Urban Venture LLC, a subsidiary of Vulcan

Inc., invested in the project and developed it jointly with Milliken. Urban Venture bought

out Milliken’s interest midway through construction in 2005.

The development was completed in 2006. That same year Urban Venture

executed and recorded a “master declaration” under the Condominium Act, creating a

four-unit condominium called “2200, a condominium.” The four units are comprised of:

(1) the commercial unit, which leases 90,000 square feet of commercial retail shops; (2)

the hotel unit, housing the 153-room Pan Pacific Hotel; (3) the food unit, leased to

Whole Foods grocery store; and (4) the residential unit, comprised of 259 residential

units, which has a separate sub-condominium association.

2200 Westlake is governed by, and acts through, the 2200 Condominium

Association, a nonprofit corporation, which the parties refer to as the Master Association

-3- No. 77017-9-114

(MA).1 The owner of each unit of 2200 Westlake is a member of the MA. The MA is

administered by a four-person board, with each owner electing one representative to

hold the single vote allocated to each owner.

In 2006, Urban Venture also recorded a separate declaration for the 259-unit

residential unit of 2200 Westlake. The “residential declaration” covers the 2200

Residential Association (RA). The RA is also organized as a nonprofit corporation. The

RA board is elected by a majority of the residential unit owners. The RA board chooses

a single member to represent it on the MA Board.

Urban Venture owned the commercial, hotel, and food store units from

completion of the project, until selling the units to third parties: the commercial unit in

March 2016, the food store unit in September 2016, and the hotel unit in February 2017.

During Urban Venture’s ownership, the MA board members were Vulcan employees,

appointed by Urban Venture. The initial board members were Gary Zak, Hamilton

Hazlehurst, and Brian Crowe.

Central to this litigation is the common expenses associated with the common

elements of 2200 Westlake and the division of the common expenses between the four

condominium units in the MA. The master declaration defines the “Common Elements”

as “all portions of the Property and the Project which are outside the boundaries of a

Unit, and improvements within the boundaries of a Unit which are designated as

Common Elements or Limited Common Elements under the provisions of Article 3.”

“Common Expenses” are defined as:

expenditures made by, or financial liabilities of the Association, together with any allocations to reserves. Common Expenses are funded by each

1 The parties do not dispute that the 2200 Condominium Association is not actually a “master association” as that term is defined in the Condominium Act, RCW 64.34.020(28), .276.

-4- No. 77017-9-1/5

Owner in accordance with its Allocated Interest, except that certain Common Expenses are specifically allocated to fewer than all Units or are specially allocated among Units based on usage or benefit, as more specifically set forth in Section 10.4. Common Expense Liability

The common expense liability, and interest in the common elements, are

determined by the units’ declared value, which results in the “Allocated Interest

Percentage.” Exhibit B to the MA declaration shows the unit data and allocated

interests for each unit.

. Unit Floor Parking Unit Name Declared Value CEL/ICE Votes ~______________ Area (Sq. Ft.) Spaces UnitC 24,352 $11,340,000 6.3 1 90covered (Commercial 36 uncovered Un it) Unit R 259,447 $138,960,000 77.2 1 318 covered (Residential Unit) Unit H (Hotel 120,309 $18,000,000 10.0 1 55 covered Unit) 2 uncovered Unit F (Food 43,616 $11,700,000 6.5 1 272 covered Store Unit) 12 uncovered Total $180,000,000 100% 4

“Declared value” is defined as “the value of each Unit as stated in Schedule B,

which does not necessarily reflect market value and will not be affected by sales price.”

In contrast, the preamble to the MA declaration indicates that concerns about fair

governance for all units culminated in “the decision to allocate many of the costs by

square footage (for the sake of simplicity) or, if feasible, by separate metered usage.”

The common element liability, however, does not correspond to square footage. The

RA declaration includes Schedule B, which allocates Unit R’s common element liability

to each condominium unit based on “relative area of Units.”

-5- No. 77017-9-116

Prior Litigation

Plaintiff Grace bought a residential unit at 2200 Residential in 2006. Grace

considers himself an experienced real estate purchaser. Grace purchased a second

unit at 2200 Residential in 2015, after this litigation began. Plaintiff Mohandessi, an

attorney, purchased a residential unit at 2200 Residential in 2010.

Grace has been in conflict with the RA since April 2007. In protest to the RA

Board’s actions and assessments, Grace stopped paying his full dues in 2008. The RA

sued Grace in 2011 and 2013 to collect unpaid dues and late charges.2 Grace asserted

defenses and counterclaims, alleging that the RA breached its fiduciary duty, committed

fraud, trespass, and conversion, and held an invalid election. The trial court dismissed

Grace’s counterclaims and defenses, finding in favor of the RA.

From 2009 until 2012, the RA and MA pursued claims against Urban Venture

and Vulcan under the WCA and CPA for construction defects. In November 2012, the

RA, MA, Vulcan, and Urban Venture entered a settlement agreement. Urban Venture

agreed to pay the RA $26,000,000 in exchange for release of the RA’s claims against

Urban Venture. The RA received $3,120,000 to use as it deemed appropriate, with the

remaining $22,800,000 set aside for remediation. The validity and fairness of the

common expense liability and allocation in the master declaration was raised during

settlement discussions but did not become part of the 2012 settlement agreement.

Current Litigation

The plaintiffs filed this lawsuit against the various defendants in October 2015.

The original complaint sought declaratory judgment that the MA violated the

2 2200 Residential Association v. Grace, No. 7265 1-0 (Wash. Ct. App. July 25, 2016) (unpublished).

-6- No. 77017-9-117

Condominium Act and the MA declaration by “improperly and disproportionately

shift{ing] costs of 2200 Westlake onto plaintiffs and other residential owners.” The

plaintiffs alleged that: (1) the MA and RA declarations were contracts, and that the MA

and RA breached those contracts and the implied covenant of good faith and fair

dealing, (2) the MA and RA boards breached their fiduciary duties, and (3) Urban

Venture breached its fiduciary duties, and tortuously interfered with the MA and RA’s

performance of their contractual obligations under their respective declarations. The

plaintiffs made the claims on behalf of themselves, as well as derivatively on behalf of

the RA and double derivatively on behalf of the MA.

The defendants moved for judgment on the pleadings under CR 12(c). On

February 12, 2016, the trial court dismissed the plaintiffs’ direct claims against the MA

for lack of standing, and the breach of contract claims against the RA under res

judicata, to the extent that the events occurred before December 2014 (the date of

Grace’s settlement in his prior litigation). The court also dismissed the breach of an

implied covenant of good faith and fair dealing, finding that there was no legal authority

for an implied covenant under a condominium declaration. The trial court limited the

plaintiffs’ remaining claims based on the statute of limitations, RCW 4.16.080, to the

extent they were based on events occurring more than three years before the plaintiffs

filed suit in October 2015.

The defendants then moved for summary judgment. On September 29, 2016,

the trial court granted in part and denied in part the defendants’ motions. The court

dismissed all claims asserted by the plaintiffs derivatively on behalf of the RA and MA.

No claims remained against Urban Venture and the MA after the September 29, 2019,

-7- No. 77017-9-1/8

order. The trial court granted the plaintiffs’ request for a CR 56(f) continuance to

perform additional discovery on the remaining direct claims against the RA. During

discovery, Urban Venture indicated that it could not identify a specific formula for the

declared value or the common expense liability, but that the declared value was likely

the product of completed construction costs.

In December 2016, the plaintiffs amended their complaint, adding new claims

challenging the common expense liability and adding Vulcan as a party. The plaintiffs

amended their claims against the RA to include a claim for breach of the residential

declaration arising from the RA’s entry into the November 2012 settlement agreement.

On December 20, 2016, the plaintiffs voluntarily dismissed their claims against the RA.

The plaintiffs were granted leave to amend their complaint twice more, in March

2017 and May 2017. The plaintiffs’ flew claims alleged that: (1) Urban Venture and the

MA violated the Condominium Act, (2) Urban Venture, Vulcan, and certain MA board

members, breached duties under the Condominium Act, (3) Urban Venture and Vulcan

aided and abetted the MA’s alleged breach of duties, (4) Urban Venture violated the

CPA, and (5) Vulcan tortuously interfered with the plaintiffs’ expectancy that the MA and

RA, and respective boards, would comply with all applicable laws and duties. The

plaintiffs also sought a declaratory judgment that the 2012 settlement agreement was

“void and unenforceable as collusive, fraudulent, and against public policy” (referred to

as the “twenty first claim”). The plaintiffs named the RA as a “nominal” defendant.

Prior to the plaintiffs’ third amended complaint, the defendants moved for

summary judgment dismissal of the plaintiffs’ remaining claims in March 2017. The

plaintiffs also moved for partial summary judgment.

-8- No. 77017-9-1/9

In May 2017, the trial court dismissed all remaining claims on summary judgment

including the plaintiffs’ newest claims added in their third amended complaint. The court

dismissed the twenty-first claim because “there [was] no evidence of fraud, collusion or

undue influence” to create an issue of fact regarding the settlement agreement’s

validity. The trial court dismissed all other claims, finding the statute of limitations

barred the plaintiffs’ claims because all challenges related to the master declaration,

which was recorded in 2006.~

As part of its ruling, the trial court determined that the common expense liability

allocation in the MA declaration “does not comply with RCW 64.34.224(1) because the

[MA] Declaration did not state the formula or method used to establish the allocation of

common expenses due to the fact that the Declarant did not use a formula or method to

establish the allocation of common expenses.” The court rejected the defendants’

argument that the table in exhibit B is the formula or method used to establish the

percentage allocation.

The trial court found that the defendants were prevailing parties since the

plaintiffs’ claims were dismissed with prejudice. The defendants separately sought their

attorney fees as the prevailing party under the Condominium Act, the master

declaration, or the 2012 settlement agreement. The defendants also sought their

litigation costs under the master declaration, the 2012 settlement agreement, and the

Declaratory Judgment Act, RCW 7.24.100. The trial court awarded limited fees under

the 2012 settlement agreement alone, and awarded costs under RCW 7.24.1 00.~

~ Urban Venture and Vulcan, joined by the MA, argued that an alternative ground for dismissal was that the plaintiffs’ claims were barred by the settlement agreement. “The trial court’s attorney fee award is more thoroughly explained in Section VIII below.

-9- No. 77017-9-1/10

The plaintiffs appealed and the defendants cross appealed.

The validity of the common expense liability allocation is central to the plaintiffs’

grievances, thus we first address whether the declared value violates ROW

64.34.224(1). The trial court found that the declared value violated ROW 64.34.224(1).

The defendants’ cross appeals request that, if this court remands for further litigation,

we review the trial court’s conclusion. We agree with the trial court that the declared

value used to determine the common expense liability violates ROW 64.34.224(1)

because it does not state a method or formula for its basis.

We review questions of statutory interpretation de novo. Jametsky v. Olsen, 179

Wn.2d 756, 761-62, 317 P.3d 1003 (2014). The goal of statutory interpretation is to

“ascertain and carry out the legislature’s intent.” Jametsky, 179 Wn.2d at 762. We give

effect to the plain meaning of the statute, “derived from the context of the entire act as

well as any related statutes which disclose legislative intent about the provision in

question.” Jametsky, 179 Wn.2d at 762 (internal quotations omitted). If the statute’s

language is unambiguous, then the inquiry ends. Jametsky, 179 Wn.2d at 762. If,

however, the language is subject to more than one reasonable interpretation, we “may

resort to statutory construction, legislative history, and relevant case law for assistance

in discerning legislative intent.” Jametsky, 179 Wn.2d at 762.

A.

The plain language of the Oondominium Act provides that a condominium

declaration must allocate the division of undivided interests in the common elements

-10- No. 77017-9-I/li

and state the formula or methods used to establish those allocations. Under RCW

64.34.224(1):

The declaration shall allocate a fraction or percentage of undivided interests in the common elements and in the common expenses of the association, and a portion of the votes in the association, to each unit and state the formulas or methods used to establish those allocations. Those allocations may not discriminate in favor of units owned by the declarant or affiliate of the declarant. The defendants contend that exhibit B meets the requirements of RCW

64.34.224(1). First, the defendants contend that the “statute permits the declarant to

allocate . . . by size, value, and numbers of units or other appropriate basis.”

Accordingly, the defendants contend that “[b]ased on a plain-meaning analysis, the

statute requires disclosure of two facts: (1) the ‘fraction or percentage’ allocated to each

unit, and (2) the ‘formula or method’ that is the basis of that allocation.” The defendants

contend that exhibit B allocates common element expenses to each unit and that the

common expense liability is the method that represents the basis of the allocation.

The defendants’ argument ignores the last sentence of RCW 64.34.224(1), which

states ‘{tjhose allocations may not discriminate in favor of units owned by the declarant

or affiliate of the declarant.” To support their argument, the defendants contend that

“[a]ttaching an appraisal to the declaration or otherwise disclosing how declared values

were chosen would add nothing in terms of disclosing how common expenses are

allocated in a condominium.” We disagree that disclosing the method would add

nothing because the statute requires that the method not discriminate in favor of the

Declarant. Exhibit B does not provide this court with any basis to evaluate whether the

declared value discriminates in favor of the Declarant, thus it fails to meet the

requirements of RCW 64.34.224(1).

—11— No. 77017-9-1/12

The second sentence of RCW 64.34.224(1) informs our interpretation of the first

sentence because it directly references the allocations discussed in the first sentence.

We interpret each word of a statute and accord it meaning. State v. Roggenkamp, 153

Wn.2d 614, 624, 106 P.3d 196 (2005). Disclosing the formula or method underlying the

declared values ensures that the allocations do not discriminate in favor of units owned

by the declarant or an affiliate of the declarant. A declarant cannot defend that their

allocations do not discriminate in their favor without reference to the formula or method

underlying the division of common expenses. Here, Urban Venture indicated that the

declared value

was not produced by a set formula, but rather was a product of the reasonable value and the cost of completed construction. The hotel, food, and commercial spaces were substantially completed for the condominium purposes prior to final tenant improvements that were part of various leases. The residential units included completed interior fixtures, finished, and appliances. Urban Venture was unable, however, to produce evidence supporting the calculation for

the declared valued in exhibit B. Further, Urban Venture’s explanation was not included

in the MA declaration accompanying exhibit B.

The defendants also contend that Lake v. Woodcreek Homeowners Ass’n., 169

Wn.2d 516, 243 P.3d 1283 (2010), supports their interpretation that the allocation can

be set arbitrarily, so long as the declarant discloses the values in the declaration.

(2010). The defendants cite Lake for the proposition that there, the court found that

“value” in the Horizontal Property Regimes Act (HPRA) “need not relate to an

apartment’s fair market value or any other criteria” and that under the HPRA, “the

values may be set arbitrarily, as long as they are stated in the declaration.” 169 Wn.2d

at 534.

-12- No. 77017-9-1/13

We disagree that Lake is relevant to our plain-meaning analysis. In Lake, our

Supreme Court was interpreting ROW 64.32.050(1) which states, “[e]ach apartment

owner shall be entitled to an undivided interest in the common areas and facilities in the

percentage expressed in the declaration. Such percentage shall be computed by taking

as a basis the value of the apartment in relation to the value of the property.” ROW

64.32.050(1); see Lake, 169 Wn.2d at 529. The HPRA statutory language discussed in

Lake is substantially different from the Condominium Act. The HPRA does not address

discriminatory practices. In contrast, the Condominium Act states that the methods or

formulas shall be stated and that allocations may not discriminate in favor of units

owned by the declarant. Further, the HPRA does not reference methods or formulas.

Thus, Urban Venture’s argument that the declared value, without more, is itself a

method or formula and compliant with the Condominium Act is without merit.

B.

Legislative history also supports our interpretation of the plain-meaning of ROW

64.34.224(1). On the issue of allocating costs for common expenses, the comments in

the Senate Journal establish that the legislature wanted declarants to explain the

formula or method underlying those allocations. The comments state that ROW

64.34.224(1) “does not require that the formulas used by the declarant be justified, but it

does require that the formulas be explained.” 2 SENATE JOURNAL, 51st Leg., Reg. Sess.,

App. at 2061 (Wash. 1990).

If size is chosen as a basis of allocation, the declarant must choose between reliance on area or volume, and the choice must be indicated in the declaration. The declarant might further refine the formula by, for example, excluding unheated areas from the calculation or by partially discounting such areas by means of a ratio. Again, the declarant must indicate the choices he made and explain the formulas he has chosen.

-13- No. 77017-9-1/14

2 SENATE JOURNAL, App. at 2061 (emphasis added). The legislature intended that the

declarant include the formula or method underlying the common expense element cost

allocations in the declaration.

The trial court did not err when it concluded that the declared valued in the MA

declaration violates RCW 64.34.224(1).

Ill.

The plaintiffs contend that the trial court erred in its May 27, 2017, summary

judgment order by dismissing claims against the MA based on the statute of limitations.

While the plaintiffs agree the relevant statute of limitations is three years under ROW

4.16.080(2), they argue that a new cause accrues every year when the MA allocates the

common expenses between the units, using the invalid declared value in exhibit B. We

agree.

We review summary judgment decisions de novo. Int’l Marine Underwriters v.

ABCD Marine, LLC, 179 Wn.2d 274, 281, 313 P.3d 395 (2013). “Summary judgment is

proper only where there is no genuine issue of material fact and the moving party is

entitled to judgment as a matter of law.” Int’l Marine Underwriters, 179 Wn.2d at 281;

CR56 (c).

ROW 4.16.080(2) states that “an action for taking, detaining, or injuring personal

property, including an action for the specific recovery thereof, or for any other injury to

the person or rights of another not hereinafter enumerated” shall be commenced within

three years. The determination of whether the statute of limitations bars a plaintiff’s

claim depends on when the plaintiff’s cause of action accrued. Haslund v. City of

Seattle, 86 Wn.2d 607, 619, 547 P.2d 1221 (1976). The general rule is “that a cause of

-14- No. 77017-9-1/15

action accrues and the statute of limitations begins to run when a party has the right to

apply to a court for relief.” Haslund, 86 Wn.2d at 619. The issue of how the statute of

limitations applies to condominium association assessments that accrue on a yearly

basis is an issue of first impression.

Generally, the right to apply to a court for relief requires each element of the

action be susceptible to proof, this includes actual loss or damage. Haslund, 86 Wn.2d

at 619. “The determination of the time at which a plaintiff suffered actual and

appreciable damage is a question of fact.” Haslund, 86 Wn.2d at 620. “In some

circumstances, of course, a court may be able to conclude as a matter of law that no

triable issue of fact exists as to when plaintiff suffered actual and appreciable damage

giving rise to a practical legal remedy.” Haslund, 86 Wn.2d at 621.

Here, the plaintiffs suffer actual and appreciable damage when they pay an

assessment that violates RCW 64.34.224(1). Under RCW 64.34.090, ‘[e]very contract

or duty governed by this chapter imposes an obligation of good faith in its performance

or enforcement.” The MA declaration was amended in 2010 to allow the MA board the

discretion to use another method or formula to allocate the common expenses between

the four units.5 Each time the MA board chose to use the allocations in exhibit B, it

violated its duty of good faith to the RA members by allocating in a manner that violates

RCW 64.34.224(1). Thus, each time the MA board passes a budget, the RA members

suffer actual and appreciable damage and a new cause of action accrues for violations

of RCW 64.34.224(1) and RCW 64.34.090.

~ The MA declaration amendment states “Any Common Expense, or portion thereof, benefitting fewer than all of the Units may be assessed by the Board exclusively against the Units benefitted.”

-15- No. 77017-9-1/16

Therefore, the trial court erred when it concluded that the plaintiffs’ cause of

action accrued in 2006. As members of the RA, the plaintiffs’ causes of action accrue

each time the MA board passes a budget. The plaintiffs may bring claims for their

individual damages accruing between 2013 and 2016—three years before filing the

corn p Ia i nt.

IV.

The plaintiffs next argue that the trial court erred in its September 29, 2015, order

on summary judgment, when it dismissed their derivative claims brought on behalf of

the RA and MA. The plaintiffs contend that the trial court erred as a matter of law in

concluding that individual condominium association members do not have derivative

standing. We disagree.

The parties do not dispute that both the MA and RA were incorporated under the

Washington Nonprofit Corporation Act (WNCA), chapter 24.03 RCW. The WNCA was

enacted in 1967. See Laws of 1967, ch. 235. The WNCA governs all aspects of

nonprofit corporations, including incorporation, permissible purposes and dissolution.

See, ~.g.., RCW 24.03.015, .020, .025, .220-276. Nonprofit corporations are managed

by an elected or appointed board of directors according to the corporation’s articles of

incorporation or bylaws. RCW 24.03.095 .100. In contrast to for-profit corporations, -

which are organized under the Washington Business Corporation Act (WBCA), chapter

23B.01 RCW, nonprofit corporations do not have shareholders, but instead may “have

one or more classes of members or may have no members.” RCW 24.03.065(1);

compare RCW 23B.01 .400(34).

-16- No. 77017-9-1117

The WBCA expressly authorizes shareholders of for-profit corporations to bring

derivative actions on behalf of the corporation. ROW 23B.07.400. “In a derivative suit,

a stockholder asserts rights or remedies belonging to the corporation for the

corporation’s benefit.” Haberman v. Washington Pub. Power Supply Sys., 109 Wn.2d

107, 147, 744 P.2d 1032 (1987). The WNCA, in contrast, does not authorize members

to bring derivative actions on behalf of the nonprofit corporation against third parties.

Instead, the WNCA provides only two circumstances where a member may seek judicial

relief on behalf of the nonprofit corporation: (1) a “representative suit” against an officer

or director exceeding their authority, or (2) in order to seek dissolution of the nonprofit

where the directors have acted “in a manner that is illegal, oppressive, or fraudulent” or

“where assets are being misapplied or wasted.” ROW 24.03.040, .266(1).

Relying on the “plain and unambiguous” language of the WNCA, as well as its

legislative history, the court rejected the plaintiffs’ argument that nonprofit members

have an equitable common law right to bring derivative actions in Lundberg ex rel.

Orient Found. v. Coleman, 115 Wn. App. 172, 176, 60 P.3d 595 (2002). In Lundberg, a

director attempted to bring a derivative action on behalf of a nonprofit corporation

against other directors, alleging that they had breached their fiduciary duties. 115 Wn.

App. at 176. This court held that the legislature intended to limit derivative lawsuits to

the narrow circumstances addressed in the statute, reasoning it “carefully delineates

when actions may be brought on behalf of the corporation.” Lundberg, 115 Wn. App. at

177 (citing ROW 24.03.040 and former ROW 24.03.265).

Under Lundberg, plaintiffs do not have a right to bring a derivative action on

behalf of the nonprofit RA or MA. Their efforts to distinguish Lundberg are not

-17- No. 77017-9-1118

persuasive. The trial court did not err when it dismissed the plaintiffs’ derivative claims

brought on behalf of the RA and MA.

V.

While the WNCA does not authorize individual members to bring derivative

actions on behalf of a nonprofit corporation, this does not resolve whether individual

members may bring individual claims against RA or MA. The plaintiffs contend that the

trial court erred in its February 12, 2016, order by dismissing the plaintiffs’ individual

claims against the RA and MA for breach of good faith due to their lack of standing.

The plaintiffs also contend the trial court erred in denying their motion for leave to

amend their complaint to add allegations of breach of the declaration or the

Condominium Act due to standing. Because the plaintiffs have standing under the

Condominium Act, we agree.

The MA governs all of 2200 Westlake based on the master declaration. One unit

of the MA—the RA—is a residential condominium within the larger condominium. While

individual residents of the RA are not directly parties to the master declaration, they own

a portion of the overall master condominium and are bound by the terms of the master

declaration. This includes the common expense allocation within the MA.

The Condominium Act broadly allows

If a declarant or any other person subject to this chapter fails to comply with any provision hereof or any provision of the declaration or bylaws, any person or class of persons adversely affected by the failure to comply has a claim for appropriate relief. The court, in an appropriate case, may award reasonable attorney’s fees to the prevailing party.

RCW 64.34.455 (emphasis added).

-18- No. 77017-9-1/19

Further, the Condominium Act provides that “{tjhe remedies provided by this

chapter shall be liberally administered to the end that the aggrieved party is put in as

good a position as if the other party had fully performed.” RCW 64.34.100. Thus, by

the plain language, the Condominium Act provides a direct action for members to sue

their condominium association for violations of the Condominium Act or declaration.6

This interpretation is further supported by the legislative history. The Senate

Journal comments state that RCW 64.34.455:

provides a general cause of action or claim for relief for failure to comply with the Act by either a declarant or any other person subject to the Act’s provision. Such person might include unit owners, persons exercising a declarant’s right of appointment pursuant to RCW 64.34.308(4), or the association. A claim for appropriate relief might include damages, injunctive relief, specific performance, rescission or reconveyance if appropriate under the law of the state, or any other remedy normally available under state law. The section specifically refers to “any person or class of persons” to indicate that any relief available under the state class action statute would be available in circumstances where a failure to comply with this Act has occurred. This section permits attorney’s fees to be awarded in the discretion of the court to any party that prevails in any action. 2 SENATE JOURNAL, App. at 2091. This comment indicates that the legislature intended

to allow condominium members the right to sue their association for violations under the

Condominium Act.

Accordingly, we conclude that the trial court erred when it dismissed the plaintiffs’

direct action against the MA for breach of good faith, and denied the plaintiffs’ motion to

6 The defendants provided supplemental authorities explaining that an individual may not assert a claim that is derivative in nature. We agree with these authorities, but they do not aid in our analysis because ROW 64.34.445 provides direct standing for the plaintiffs against both the RA and MA.

-19- No. 77017-9-1/20

amend and add claims against the MA for violations of the Condominium Act based on

standing.7

VI.

The plaintiffs next challenge the trial court’s decision in its February 12, 2016,

order on the defendants’ motion for judgment on the pleadings, concluding the plaintiffs’

breach of contract claims against the RA were barred by res judicata. The trial court’s

decision was based on the prior litigation between Grace and the RA. While we agree

that, based on the pleadings before the trial court, it appears Mohandessi’s individual

claims would not be barred by res judicata, we need not reach this issue because the

plaintiffs’ complaint failed to state a cause of action for breach of contract.

We review a CR 12(c) motion for judgment on the pleadings de novo. M.H. v.

Corp. of CatholicArchbishop of Seattle, 162 Wn.App. 183, 189, 252 P.3d 914 (2011).

A dismissal under CR 12(c) is appropriate only if “it appears beyond doubt that the

plaintiff can prove no set of facts, consistent with the complaint, which would entitle the

plaintiff to relief.” Haberman, 109 Wn.2d at 120 (internal quotation marks omitted).

The plaintiffs’ original complaint alleged two claims against the RA: (1) breach of

contract based on the assertion that the master and residential declarations were

contracts and (2) breach of implied covenant of good faith and fair dealing again based

on the assertion that the master and residential declarations were contracts. These

claims fail as a matter of law.

~ As discussed above, the trial court concluded, and we agree, that the common expense allocation violates RCW 64.34.224(1). The WNCA also imposes an obligation of good faith in the performance of duties. RCW 64.34.090.

-20- No. 77017-9-1/21

“A contract is a promise or set of promises for the breach of which gives a

remedy, or the performance of which the law in some way recognizes as a duty.”

Restatement (Second) of Contracts § 1(1981); accord Washington Fed’n of State Emps., AFL-CIO, Council 28, AFSCME v. State, 101 Wn.2d 536, 549, 682 P.2d 869

(1984). In contrast, condominium declarations are not promises between parties, but

are recorded real property instruments. Bellevue Pac. Ctr. Condo. Owners Ass’n v.

Bellevue Pac. Tower Condo Ass’n, 124 Wn. App. 178, 188, 100 P.3d 832 (2004).

Condominium owners are not bound to declarations under the same rules as parties to

a contract. Rather, owners have the power to amend a declaration by vote. See RCW

64.32.090(13); RCW 64.34.264(1). Here, the residential declaration may be amended

by consent of more than 67 percent of the owners.

Because the plaintiffs failed to allege a cause of action supporting a breach of

contract claim against the RA, dismissal of the plaintiffs’s breach of contract claims was

appropriate.8

VII.

The plaintiffs next contend that the trial court erred when it dismissed their

twenty-first claim: that the 2012 settlement agreement was void as the product of fraud

and collusion. The plaintiffs argue that the trial court dismissed their claim sua sponte.

We disagree.

8 The plaintiffs subsequently amended their complaint to add claims against the RA for breach of the residential declaration arising from the RA’s entry into the November 2012 settlement agreement. On December 20, 2016, the plaintiffs voluntarily dismissed their claims against the RA. Thus, as of December 20, 2016, there were no claims remaining against the RA.

-21 - No. 77017-9-1122

On March 17, 2017, the remaining defendants moved for summary dismissal of

all of the plaintiffs’ remaining claims. Vulcan and Urban Venture argued, among other

things, that the 2012 settlement agreement barred the plaintiffs’ claims. Before the

plaintiffs responded to the motions for summary judgment they sought leave to amend

their complaint to add their twenty-first claim: that the 2012 settlement agreement was

void as collusive, fraudulent, and against public policy. In support of their motion,

plaintiff submitted argument and multiple exhibits in support of the twenty-first claim.

The plaintiffs then argued in response to the motions for summary judgment that the

2012 settlement agreement was void as the product of fraud and collusion.

By the time of the summary judgment hearing, the trial court had granted leave to

amend, and the plaintiffs had filed their third amended complaint. During argument

Urban Venture and Vulcan confirmed that they were seeking dismissal of all claims,

including specifically the twenty-first claim based on the briefing submitted. The

plaintiffs did not object that the issue had not been properly raised or adequately

briefed. The plaintiffs instead argued the merits of their claim.

Because the plaintiffs did not object to the trial court deciding the twenty-first

claim, the plaintiffs’ argument that the dismissal was sua sponte fails. The plaintiffs

have not explained how the twenty first claim can survive a motion for summary

judgment and therefore have waived this argument on appeal.

VIII.

All parties appeal the trial court’s award of attorney fees and costs. The plaintiffs

challenge the court’s award of attorney fees under the 2012 settlement agreement. The

defendants cross appeal and challenge the trial court’s decision to reduce their attorney

-22- No. 77017-9-1123

fees to the portion spent defending the 2012 settlement agreement. The defendants

further challenge the trial court’s failure to award attorney fees under Condominium Act.

We affirm the trial court’s award of fees under the 2012 settlement agreement to Urban

Venture, Vulcan, and the RA. Because we reverse the trial court’s dismissal of the

plaintiffs’ claims against the MA we vacate the award of fees to the MA.

In Washington, attorney fees may be awarded when authorized by a contract, a

statute, or a recognized ground in equity. Fisher Props., Inc. v. Arden-Mayfair, Inc., 106

Wn.2d 826, 849-50, 726 P.2d 8 (1986). Whether a contract or law authorizes an

attorney fee award is question of law and reviewed de novo. Kaintz v. PLG, Inc., 147

Wn. App. 782, 786, 197 P.3d 710 (2008). Whether the amount of fees awarded was

reasonable is reviewed for abuse of discretion. Ethridqe v. Hwanq, 105 Wn. App. 447,

460, 20 P.3d 958 (2001). We review the trial court’s interpretation of statutory costs

provisions de novo. McConnell v. Mothers Work, Inc., 131 Wn. App. 525, 532, 128 P.3d

128 (2006).

The 2012 settlement agreement provides for prevailing party fees “arising from

the need to take action to enforce this Agreement, including mediation, arbitration, or

litigation.” The trial court awarded defendants their attorney fees “they needed to incur

to take action to enforce the Settlement Agreement.”

The plaintiffs contend that the RA owners are not bound by the terms of the 2012

settlement agreement for several reasons. The plaintiffs contend, “the residents were

not involved in negotiations, nor were they represented by counsel.” And further, the

RA owners “never voted on, let alone approved, the terms of the settlement agreement;

-23- No. 77017-9-1/24

the [RA owners] did not sign the settlement agreement; [RA owners] were not told that

the settlement agreement could impact their personal rights or liabilities; and residents

were not told that a settlement had been reached until after theagreement had been

executed.”

The plaintiffs’ argument fails because RCW 64.34.304 provides unit owners’

associations with the power to “institute, defend, or intervene in litigation or

administrative proceedings in its own name on behalf of itself or two or more unit

owners on matters affecting the condominium” and “make contracts and incur liabilities.”

RCW 64.34.304(1)(d), (e). The residential declaration provides the same owners’

association powers. In the 2012 settlement agreement, RA means any officer, director,

manager, member, unit owner, principal, partner, predecessor, successor, agent,

shareholder, and/or employee.” Thus, the 2012 settlement agreement intended to bind

RA members.

Our Supreme Court has recognized that in a condominium ‘each owner, in

exchange for the benefits of association with other owners, must give up a certain

degree of freedom of choice which he [or she] might otherwise enjoy in separate,

privately owned property.” Lake, 169 Wn.2d at 535 (citation and internal quotation

marks omitted). Thus, the RA had the authority to enter and bind the RA owners

because they agreed to give up certain freedoms, such as being signatories on a

settlement agreement where the RA settled construction defects on behalf of the

association and the RA owners. The plaintiffs have not cited any part of the residential

declaration that requires the RA owners to vote before the RA enters a settlement

-24- No. 77017-9-1/25

agreement for construction defects, thus their argument that the RA owners are not

bound because they did not vote fails.

The trial court did not err in awarding the defendants attorney fees under the

2012 settlement agreement.

While the trial court awarded the defendants their attorney fees under the 2012

settlement agreement, it limited its award to time spent defending against the claim that

the 2012 settlement agreement was void.

The RA originally requested attorney fees of $380,862.50 for its entire defense.

The trial court subsequently granted the RA’s reduced fee request of $74,245.00 for its

work defending the 2012 settlement agreement. The court also granted the MA’s

reduced fee request, awarding $49,521. The trial court rejected Urban Venture and

Vulcan’s reduced fee request of $813,605 and reduced it further to $299,198.

The defendants argue that the trial court erred because all of the claims involved

a common core of facts or legal theories. The trial court carefully considered this claim

below explaining:

Plaintiffs brought a total of 21 claims, of which thirteen made no reference to the Settlement Agreement and sought no relief that would appear to require any of the defendants to incur fees arising from the need to enforce that agreement. Plaintiffs brought their first, second, third, fifth, seventh, eighth, twelfth, fourteenth, fifteenth, sixteenth, nineteenth, and twentieth claims individually and/or derivatively against various defendants for allegedly violating the Washington Condominium Act by failing to state the formulas and methods used to establish the “Declared Value” on which they allegedly based the allocation of common expenses, by oppressing RA and its owners, by aiding and abetting those actions, by breaching the Declaration, and by tortious interference. Plaintiffs’ eighteenth claim sought an accounting, derivatively, on behalf of the RA against the MA. Those claims did not involve a common core of facts or are based on related legal theories arising from defendants’ need to

-25- No. 77017-9-1/26

enforce the Settlement Agreement. Defendants are not entitled to an award of fees incurred in defense of those claims and must segregate those fees.

Plaintiff’s fourth, ninth, tenth, and seventeenth claims mentioned the Settlement Agreement. The first of those claimed breach of the Residential Declaration and Governing Documents by, among other things, failing to reach an adequate settlement for construction defects in the 2200 Condominium. Plaintiffs’ ninth and seventeenth claims for unjust enrichment were against UV individually and Vulcan derivatively, respectively. Those claims related to UV and/or Vulcan’s alleged receipt of benefits that should have flowed to residents, which allegedly included improper settlement proceeds, among others. Plaintiffs brought their tenth claim for violation of the Washington Condominium Act and Governing Documents derivatively on behalf of RA against UV and MA and derivatively on behalf of MA against UV. Plaintiffs primarily based this claim on the misallocation of common expenses and the appointment of conflicted board members, but that claim included a reference to the settlement of construction defect claims. Notably, none of those claims sought recession or otherwise indicated that the Settlement Agreement should not be enforced. But to the extent defendants can show that they incurred fees arising from the need to enforce the Settlement Agreement in relation to those claims and they segregate those fees, they would be entitled to such an award.

Plaintiffs’ twenty-first claim is the one claim that truly appears aimed at the enforceability of the Settlement Agreement. In that claim, plaintiffs contend that the Settlement is void, collusive, fraudulent, and against public policy. This claim also relates to plaintiffs’ sixth prayer for relief that seeks a judgment declaring that agreement unenforceable (the other eight prayers for relief do not mention the Settlement Agreement). Defendants are entitled to those fees incurred in relation to this claim so long as they segregate them from those they did not incur arising from the need to enforce the Settlement Agreement.

We cannot conclude that the trial court abused its discretion in limiting the fees it

awarded under the 2012 settlement agreement.

C.

The defendants next challenge the trial court’s decision to not award attorney

fees under the Condominium Act. The Condominium Act provides that “the court, in an

appropriate case, may award reasonable attorney’s fees to the prevailing party.” RCW

-26- No. 77017-9-1/27

64.34.455. The trial court denied the defendants’ claim for attorney fees under the

Condominium Act and denied their motions for reconsideration.

As the trial court explained in denying Urban Venture and Vulcan’s motion for

reconsideration:

This Court held that UV and Vulcan were prevailing parties, but this Court did not believe this was an appropriate case to award their attorney’s fees for the reasons stated on the record at the September 12, 2017 hearing. UV and Vulcan rely on Bilanko v. Barclay, [185 Wn.2d 443, 375 P.3d 591 (2016)] Defendants contend this Court erred in reaching the latter conclusion. They argue that Bilanko is “factually indistinguishable” from this case, apparently because the Supreme Court affirmed the dismissal of the plaintiff’s claims on statute of limitations grounds and noted that the plaintiff could have moved.

Despite those two similarities, Bilanko is dissimilar from this case in several critical respects that UV and Vulcan do not acknowledge.9 Here, plaintiffs brought their claims not to enrich themselves but to derivatively benefit the 2200 Residential Association (RA) and directly benefit their fellow condo owners. They brought those claims as consumers to address what they perceived to be the unfair imposition of costs on RA by the [MA], Urban Venture LLC, and Vulcan Inc. Notably, this Court found merit to that claim and a violation by defendants of the Washington Condominium Act: the Declared Values that the Declaration used to apportion those costs were simply made-up values rather than being based on a method or formula that is capable of calculation. Further, while the defendants make much of this Court’s reference to the “scorched earth” litigation in this case, this Court noted that both sides were to blame. Indeed, plaintiffs’ opposition to defendants’ motions for reconsideration sets forth many examples of defendants’ own role in driving up the costs of this litigation.

~ Even if Bilanko was indistinguishable in all respects with this case, and it is plainly not, the Washington Supreme Court merely exercised its discretion to award fees in that case. Nowhere in that decision did the Washington Supreme Court hold that it would have been an abuse of discretion for a court to not award fees when faced with those facts.

Similarly, as the trial court explained in denying the RA’s motion for reconsideration:

RA contends this Court erred primarily by applying to RA its rationale for not awarding fees to [MA], and Vulcan and Urban Venture, LLC. . In its oral ruling this Court did emphasize that plaintiffs, in their . .

-27- No. 77017-9-1/28

role as consumers and on behalf of similarly situated residents, brought consumer protection claims of self-dealing and illegal control against the defendants. RA fails to acknowledge the reason why plaintiffs had to occupy those roles: RA failed to take any action to address the fact that the Declared Valued in the Declaration were based on made-up values rather than being based on a method or formula that is capable of calculation. Further, RA joined forces with the other defendants to actively oppose plaintiffs’ claims at every turn. Finally, while RA makes much of this Court’s reference to the “scorched earth” litigation in this case, this Court notes that RA shared much of the blame. Indeed, plaintiffs’ opposition to the [defendant] motion for reconsideration sets forth many examples of defendants’ own role in driving up the costs of this litigation.

We agree with the trial court. An award of attorney fees under ROW 64.34.455 is

discretionary. We cannot conclude that the trial court abused its discretion in denying to

award attorney fees under the Condominium Act.

We affirm the trial court’s denial of attorney fees to Urban Venture, Vulcan, and

the RA under the Condominium Act.

lx. The plaintiffs finally argue that the trial court erred by awarding costs for

“mediator fees, meals, travel, expert fees, consultant fees, or document review

expenses” under the Declaratory Judgment Act, ROW 7.24.100. The plaintiffs contend

that “costs” should have been limited to costs allowed under RCW 4.84.010. We

disagree.

We review questions of statutory interpretation de novo. State v. Dennis, 191

Wn.2d 169, 172, 421 P.3d 944 (2018). If a statute’s meaning is plain on its face, then

the court must give effect to the plain meaning as an expression of legislative intent.

De~’t of Ecology v. Campbell & Gwinn, LLC, 146 Wn.2d 1, 9-10,43 P.3d 4 (2002).

ROW 7.24.100 provides “In any proceeding under this chapter, the court may

make such award of costs as may seem equitable and just.” RCW 7.24.100 “gives the

-28- No. 77017-9-1/29

court broader discretion with regard to costs than courts have in other kinds of

proceedings.” 15 DOUGLAS J. ENDE, WASHINGTON PRAcTIcE: CIVIL PROCEDURE § 42.24 (3d ed. 201 8). The legislature’s use of the word “may” confers discretion. Strenqe v.

Clarke, 89 Wn.2d 23, 28, 569 P.2d 60 (1977). Empowering a court to do what is

“equitable” and “just” also indicated broad discretion. Farmer v. Farmer, 172 Wn.2d

616, 624, 259 P.3d 256 (2011). Nothing in the statute limits a court’s discretion.

The trial court did not abuse its discretion in awarding costs under RCW

7.24.100.

x. All parties request attorney fees on appeal. Under RAP 18.1, we may grant

attorney fees “if applicable law grants to a party the right to recover reasonable attorney

fees or expenses on review.” As discussed above, the Condominium Act grants

discretion for the court “in an appropriate case,” to award reasonable attorney fees to

the prevailing party. RCW 64.34.455. Here, RA, Urban Venture, and Vulcan are the

prevailing parties, thus we grant them attorney fees on appeal. Because the plaintiffs

prevail in their claim against the MA, we award the plaintiffs their reasonable attorney

fees on appeal of claims against the MA.

SUMMARY

We affirm the trial court’s dismissal of all claims against the RA, Urban Venture,

and Vulcan. We affirm the trial court’s conclusion that the master declaration violated

the Condominium Act because the allocation of common expenses violates ROW

64.34.224(1). We reverse the trial court’s dismissal of the plaintiffs’ claims against the

-29- No. 77017-9-1/30

We affirm the trial court’s award of attorney fees under the 2012 settlement

agreement in favor of the RA, Urban Venture, and Vulcan. We vacate the award of

~

WE CONCUR:

-30-