Shepard v. Holmes

345 P.3d 786, 185 Wash. App. 730

Opinion

¶1 Sharon Shepard appeals the trial

Siddoway, C.J.

court’s summary judgment dismissal of misrepresentation and related claims she asserted against ERA Sun River Realty and Chicago Title Insurance Company, and its denial of her motion for leave to amend her complaint to assert a contract claim against Sun River.

¶2 The trial court properly concluded that her causes of action all accrued in July 2007 and were time barred by the time she sued in December 2012. The denial of Ms. Shepard’s motion for leave to amend is affirmed on the basis that she had no viable breach of written contract claim against Sun River and amendment would have been futile. We affirm the trial court in all respects and award attorney fees and costs on appeal to Sun River.

FACTS AND PROCEDURAL BACKGROUND

¶3 In July 2007, Sharon Shepard and her former husband entered into a real estate contract to purchase a parcel of land located in Benton County as an investment property. The purchase and sale agreement described the property as “Lots 1, 2, 3, & 4 Short Plat # 865.” Clerk’s Papers (CP) at 107. Ms. Shepard believed that the property consisted of four lots that could be resold individually.

¶4 Chicago Title Insurance Company issued a preliminary commitment and title insurance policy in connection with the sale. The policy described the covered property as “Lots 1, 2, 3 and 4, as delineated on Short Plat No. 865” and included a copy of the short plat that depicted four lots. CP at 141. The short plat copy bore a stamp that stated, “This plat is for your aid in locating your land with reference to streets and other parcels. While this plat is believed to be correct, the company assumes no liability for any loss occurring by reason of reliance thereon.” CP at 145.

¶5 In the summer of 2011, Ms. Shepard decided to sell two of the lots. She contacted the Benton County Planning Department to inquire about whether one well could be used as a community well for two of the four lots and to learn about the septic requirements. According to Ms. Shepard, the head of the planning department told her at that time that in 1998 the owner of the property had recorded a “Deed of Consolidation” that consolidated the four lots into a single parcel. CP at 27. The planning department head reportedly told her that she could have rescinded the deed in 2007 after she purchased the property but that she could no longer sell the lots separately because county density requirements had since changed. Our record includes no declaration of the planning department head, nor does it contain a copy of the Deed of Consolidation. We rely, as the parties evidently did, on Ms. Shepard’s report of what she was told.¹

¶6 Ms. Shepard filed a claim of loss with Chicago Title, which responded after investigation that neither the existence of the Deed of Consolidation nor the intervening change in zoning requirements presented a loss insured by the title policy.

¶7 In December 2012, Ms. Shepard filed a complaint for breach of contract; misrepresentation; violations of the Washington Consumer Protection Act (CPA), chapter 19.86 RCW; and failure to pay an insurance claim in bad faith. She named as defendants David and Lorraine Holmes, who had sold the property to Ms. Shepard and her former husband; Sun River, the Holmeses’ real estate agent; and Chicago Title. The complaint alleged that Ms. Shepard was told by the Holmeses, “through their real estate agent ERA” and “by others including Chicago Title,” that the individual lots could be separately sold, and that these misrepresentations induced her to purchase the property. CP at 2. She alleged that the property had less value if it had to be sold as a single, undivided parcel rather than as four separate lots.

f 8 In the section of her complaint entitled “Causes of Action,” Ms. Shepard alleged a claim for breach of contract against the Holmeses, claims of misrepresentation and violation of the CPA against Sun River, and claims of misrepresentation and bad faith (failure to pay a covered claim and disclose recorded defects of title) against Chicago Title.

¶9 Within a couple of months of Ms. Shepard’s filing the complaint, Sun River moved to dismiss her misrepresenta tion and CPA claims against it pursuant to CR 12(b)(6), arguing that the claims were time barred on their face. Ms. Shepard responded that the discovery rule applied to her claims, with the result that the statutes of limitation did not begin to run until she discovered the existence of the Deed of Consolidation in 2011. She also brought to the court’s attention that she had not had a copy of her real estate purchase and sale agreement at the time she filed her complaint and had only recently been able to obtain a copy by subpoena.

f 10 The trial court conducted hearings on Sun River’s motion in March. Because the parties had submitted declarations addressing matters outside of the scope of the pleadings, the trial court treated the motion as one for summary judgment. At the conclusion of the hearings, the trial court orally ruled that the recorded Deed of Consolidation constituted constructive notice to all subsequent purchasers of the property, with the result that Ms. Shepard’s causes of action for negligent misrepresentation and violation of the CPA accrued no later than the closing of her purchase of the property in July 2007. Because more than five years had passed before she filed her complaint, the three- and four-year statutes of limitations for the misrepresentation and CPA claims, respectively, had run.

¶11 In ruling on the motion, the court observed that while Ms. Shepard had made reference in her opposition to a recently discovered contract, “[t]here is no claim for breach of contract that has been filed in this case in regard to [Sun River].” Report of Proceedings (RP) (Mar. 29, 2013) at 29.

¶12 Ms. Shepard immediately responded that “the complaint does allege a breach of contract.” Id. She asked, if her pleading was not sufficiently specific, that she be permitted to file a motion to amend the complaint to assert a claim of breach of written contract claim against Sun River — a claim subject to a six-year statute of limitations that would not be time barred. See RCW 4.16.040(1). Without entertaining further argument, the trial court reiterated that it had reviewed the complaint, saw no breach of contract claim against Sun River, and was denying the request for leave to file a motion to amend.

¶13 In early May, after being served with Sun River’s proposed order dismissing her claims and a notice of presentment, Ms. Shepard filed a written motion for leave to amend her complaint along with a proposed amended complaint. The amended complaint included an allegation that Sun River was a “signatory party” to the purchase and sale agreement by which Ms. Shepard and her former husband purchased the property. CP at 313.

¶14 The court addressed Sun River’s proposed dismissal order, a request by Sun River for attorney fees, and Ms. Shepard’s motion to amend at a hearing held on May 17. At Sun River’s request, the court first entertained presentment of the order dismissing the claims against Sun River. The court signed the order as presented. It then addressed Ms. Shepard’s motion to amend.

f 15 With the order of dismissal having been entered, Sun River argued that it was no longer a party to the action, rendering Ms. Shepard’s motion to amend untimely, and alternatively, that amendment was futile. The trial court agreed that the motion to amend was untimely and denied it.

¶16 The court awarded Sun River attorney fees in the amount of $8,413, finding that by the terms of the real estate purchase and sale agreement, Sun River, as the real estate broker or licensee, was entitled to its attorney fees from litigation arising out of the real estate transaction.

¶17 Meanwhile, in early April, Chicago Title had filed its own motion for summary judgment. It argued, as Sun River had, that Ms. Shepard’s misrepresentation and CPA claims were time barred. It also argued that her bad faith claims failed as a matter of law on the merits because it was undisputed that (1) it had investigated and resolved her claim under its policy, (2) it had no duty to disclose the Deed of Consolidation, and (3) its title policy did not cover the claim.

¶18 Once again, Ms. Shepard argued that the court should apply the discovery rule in determining when her causes of action accrued. She did not respond to Chicago Title’s arguments that her bad faith claims failed as a matter of law on the merits.

f 19 The hearing on Chicago Title’s motion was held in late May. The court granted the motion.

¶20 Ms. Shepard appeals the orders dismissing her claims against Sun River and Chicago Title, the court’s denial of her oral and written motions for leave to amend her complaint, and the order awarding attorney fees to Sun River.

ANALYSIS

¶21 Ms. Shepard fails to make assignments of error in her opening brief, but it is clear from her argument that she asserts four. She argues that the court erred or abused its discretion in (1) concluding that her misrepresentation and CPA claims were time barred, (2) concluding that her original claim did not sufficiently plead a contract claim against Sun River, (3) denying her leave to amend her complaint to assert a contract claim, and (4) awarding attorney fees to Sun River. We address the issues in turn.

The trial court correctly concluded that the misrepresentation and CPA claims were time barred

¶22 A three-year statute of limitations applies to claims for misrepresentation and fraud. RCW 4.16.080(4) (fraud); Davidheiser v. Pierce County, 92 Wn. App. 146, 156 n.5, 960 P.2d 998 (1998) (negligent misrepresentation is subject to limitations period for fraud). A four-year statute of limitations applies to CPA claims. RCW 19.86.120; Pic kett v. Holland Am. Line-Westours, Inc., 145 Wn.2d 178, 196, 35 P.3d 351 (2001).

¶23 RCW 4.16.080(4) provides that an action for relief on the ground of fraud is “not to be deemed to have accrued until the discovery by the aggrieved party of the facts constituting the fraud.” RCW 19.86.120 provides more generally that a claim for damages under the CPA is barred unless commenced “within four years after the cause of action accrues.”

¶24 The general rule is that “[a] cause of action accrues and the statute of limitations begins to run when a party has the right to apply to a court for relief.” O’Neil v. Estate of Murtha, 89 Wn. App. 67, 69-70, 947 P.2d 1252 (1997). A party has the right to apply to a court for relief “when the plaintiff can establish each element of the action.” Hudson v. Condon, 101 Wn. App. 866, 874, 6 P.3d 615 (2000).

¶25 The discovery rule is an exception to the general rule of accrual and has been applied by Washington courts to claims where “injured parties do not, or cannot, know they have been injured.” In re Estates of Hibbard, 118 Wn.2d 737, 744-45, 826 P.2d 690 (1992). “The decision to extend the discovery rule to a cause of action is essentially a matter of judicial policy.” Denny’s Rests., Inc. v. Sec. Union Title Ins. Co., 71 Wn. App. 194, 216, 859 P.2d 619 (1993). Where the discovery rule applies, “a cause of action accrues when the plaintiff, through the exercise of due diligence, knew or should have known the basis for the cause of action.” Green v. Am. Pharm. Co., 86 Wn. App. 63, 66, 935 P.2d 652 (1997), aff’d, 136 Wn.2d 87, 960 P.2d 912 (1998).

¶26 RCW 4.16.080(4) effectively codifies the discovery rule as the basis on which a claim for fraud or misrepresentation accrues. See First Md. Leasecorp v. Rothstein, 72 Wn. App. 278, 282, 864 P.2d 17 (1993) (characterizing RCW 4.16.080(4) as “a discovery-rule exception to the 3-year accrual period”). In applying the discovery rule, actual knowledge of fraud will be inferred for purposes of the statute if the aggrieved party, by the exercise of due diligence, could have discovered it. Strong v. Clark, 56 Wn.2d 230, 232, 352 P.2d 183 (1960). The discovery rule can also apply to CPA claims. Pickett v. Holland Am. LineWestours, Inc., 101 Wn. App. 901, 913, 6 P.3d 63 (2000), rev’d on other grounds, 145 Wn.2d 178.

¶27 One instance in which actual discovery will be inferred is where the facts constituting the fraud were a matter of public record. As our Supreme Court explained in Davis v. Rogers, 128 Wash. 231, 236, 222 P. 499 (1924), where facts constituting fraudulent acts were matters of public record, and thus “easily ascertainable,” the public record serves as “constructive notice to all the world of its contents.” “[T]he defrauded party cannot be heard to say that he has not discovered the facts showing the fraud within the limit of the statute if the facts should have been discovered prior to that time by anyone exercising a reasonable amount of diligence.” Id. at 235-36.

¶28 The court applied this principle in Strong, which dealt with constructive notice of an alleged fraudulent conveyance. Owners of a farm entered into a written lease of their farm ground that included a grant to the tenants of an option to purchase the farm. The lease and option were recorded in 1952. The tenants exercised the option in 1956, and the owner-lessors accepted payment and executed a deed. Strong, 56 Wn.2d at 231. Two years later, the now-former owner-lessors were adjudicated bankrupts. Id. The bankruptcy trustee, acting on behalf of creditors, thereafter sued to set aside the deed on the basis that the option included in the lease was supported by inadequate consideration and was a fraudulent conveyance. The trial court dismissed the suit, finding that it was barred by the statute of limitations. Id. at 232.

f 29 On appeal, our Supreme Court held that the action was properly dismissed. Because actual knowledge of fraud will be inferred if the aggrieved party, by the exercise of due diligence, could have discovered it, the creditors were deemed to have discovered the alleged inadequacy of the consideration for the option when the lease was recorded in 1952. The recording gave “constructive notice to all persons that the owners had given the tenants an option to purchase the property for the consideration specified therein.” Id. at 233. As observed in Aberdeen Federal Savings & Loan Ass’n v. Hanson, 58 Wn. App. 773, 777, 794 P.2d 1322 (1990), Strong stands for the proposition that “the recording of an instrument affecting real property is constructive notice to all those who subsequently acquire an interest in the property and have reason to refer to the record in which the document is recorded.”

|30 On the basis of this authority, Sun River and Chicago Title argued that Ms. Shepard’s misrepresentation and CPA claims accrued at the time she closed her purchase of the Holmeses’ property in July 2007, with the result that the three- and four-year statutes of limitations had run before she commenced her lawsuit five and one-half years later, in December 2012.

¶31 We review summary judgment decisions de novo, performing the same inquiry as the trial court. Hisle v. Todd Pac. Shipyards Corp., 151 Wn.2d 853, 860, 93 P.3d 108 (2004). In reviewing dismissal of a claim on summary judgment, we “consider[ ] the facts and the inferences from the facts in a light most favorable to the nonmoving party.” Jones v. Allstate Ins. Co., 146 Wn.2d 291, 300, 45 P.3d 1068 (2002). Summary judgment is appropriate where there is “no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” CR 56(c).

¶32 Like the option to purchase in Strong, the Deed of Consolidation in this case was subject to the recording statute, RCW 65.08.070. “Conveyances” required to be recorded under the statute include “every written instrument by which any estate or interest in real property is created, transferred, mortgaged or assigned or by which the title to any real property may be affected” RCW 65.08.060(3) (emphasis added). The Deed of Consolidation affected title to the property.

¶33 When she purchased the property in July 2007, Ms. Shepard was therefore on constructive notice of the existence of the Deed of Consolidation. Any statement or omission that she contends misled her had to have taken place before she purchased in order to have proximately caused her loss. If she sustained damage as a result of the alleged misrepresentation, it was because she acquired property that no longer enjoyed the development rights that vested when the parcel was short platted; that damage arose as soon as she closed the purchase. Because these and all other elements of misrepresentation and any violation of the CPA would have existed on the date Ms. Shepard purchased the property, Sun River and Chicago Title correctly argued that her misrepresentation and CPA claims accrued, and the statutes of limitations began to run, at that time.²

¶34 Ms. Shepard objects that applying the rule in Strong transforms the limitation period under RCW 4.16.080(4) into a disfavored statute of repose because the limitation period would have begun running in 1998 and expired even before she purchased the property. “A statute of repose potentially bars a suit before the cause of action even arises.” Rothstein, 72 Wn. App. at 282. Ms. Shepard cites Strong as holding that “ ‘[w]hen the facts upon which the fraud is predicated are contained in ... the public record ... the statute of limitations begins to run at the date of the recording of the instrument.’ ” Br. of Appellant at 18 (emphasis added) (quoting Strong, 56 Wn.2d at 232).

f 35 It is a mistake to read this statement in Strong in isolation. Strong did not purport to change the law as to when a cause of action accrues. Read in its entirety, it did not hold that the recording of an instrument alone triggers the limitation period for any misrepresentation ever made thereafter about the instrument’s effect on title. Implicit in the decision, even if not stated, is that with the recording of the lease in 1952, all of the elements of the creditors’ fraudulent conveyance claims existed. It was the fact that the creditors’ fraudulent conveyance action accrued in 1952 that caused the statute of limitations to begin running, not the stand-alone fact that the lease was recorded at that time.

¶36 Here, the trial court applied RCW 4.16.080(4) and RCW 19.86.120 as statutes that limited the time within which Ms. Shepard must bring suit after her causes of action accrued. The limitations periods did not begin to run in 1998 because she had not yet been allegedly misled, taken action in reliance, and suffered resulting damage. The same is true for her claims for violation of the CPA, which require proof of both “an unfair or deceptive act” and a resulting injury. Westcott v. Wells Fargo Bank, NA, 862 F. Supp. 2d 1111 (W.D. Wash. 2012) (CPA claim accrued on or before date of closing). The trial court (properly) recognized that it was not until the closing of her purchase in July 2007 that all elements of her claims existed and she had the right to apply to a court for relief.

¶37 Ms. Shepard also contends that the constructive notice doctrine does not overcome her right to rely on the “actual” representations of the parties; by “actual,” she appears to mean “explicit.” But the Washington cases on which she relies do not support her contention. None says or implies that explicit representations are treated differently from implicit representations when a purchaser has constructive knowledge of true facts. Ms. Shepard provides no authority or reasoned argument as to why well-settled case law establishing that recorded documents provide constructive notice do not apply. See RAP 10.3(a)(6); McKee v. Am. Home Prods. Corp., 113 Wn.2d 701, 705, 782 P.2d 1045 (1989) (“We will not consider issues on appeal that. . . are not supported by argument and citation of authority.”).

¶38 Both Sun River and Chicago Title argue that the trial court’s orders dismissing Ms. Shepard’s claims against them on summary judgment can be affirmed on the alternative basis that no misrepresentations were made at the time Ms. Shepard purchased the property. While there is merit to this argument, we need not address it, since we are able to affirm the trial court on the time bar basis on which it dismissed the claims.

¶39 Because undisputed facts established that Ms. Shepard’s misrepresentation and CPA claims were time barred, summary judgment was appropriate.

|40 Affirmed.

¶41 The remainder of this opinion has no precedential value. Therefore, it will be filed for public record in accordance with RCW 2.06.040, the rules governing unpublished opinions.

Brown and Korsmo, JJ., concur.

Footnotes

1

Ms. Shepard’s amended complaint describes the consolidation instrument as a quitclaim deed “purport[ing] ... to consolidate the four parcels back into one.” CP at 314.

2

The six elements of negligent misrepresentation are that (1) a defendant supplied information for the guidance of others in their business transactions that was false, (2) the defendant knew or should have known that the information was supplied to guide the plaintiff in business transactions, (3) the defendant was negligent in obtaining or communicating false information, (4) the plaintiff relied on the false information supplied by the defendant, (5) the plaintiff’s reliance on the false information supplied by the defendant was justified, and (6) the false information was the proximate cause of damages to the plaintiff. Borish v. Russell, 155 Wn. App. 892, 905 n.7, 230 P.3d 646 (2010).

To establish a CPA violation, the plaintiff must prove (1) an unfair or deceptive act or practice that (2) occurs in trade or commerce, (3) impacts the public interest, (4) and causes injury to the plaintiff in her business or property, and (5) the injury is causally linked to the unfair or deceptive act. Michael v. Mosquera-Lacy, 165 Wn.2d 595, 602, 200 P.3d 695 (2009).