Union Street Holdings, Llc v. South Sound Charities, Inc.

• Court: Court of Appeals of Washington
• Decided: May 22, 2017
• Docket: 76015-7
• Status: Unpublished

Opinion

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

UNION STREET HOLDINGS, LLC, ) No. 76015-7-1 ) Respondent, ) ) DIVISION ONE v. ) ) SOUTH SOUND CHARITIES, INC. ) ) Appellant, ) ) SOUTH SOUND SPORTS ) MANAGEMENT, LLC; SOUTH SOUND) SPORTS VENTURES, INC., ) UNPUBLISHED OPINION ) Defendants. ) FILED: May 22, 2017 )

MANN, J. —After South Sound Sports Management(Management) defaulted on

a loan of $3.46 million, its property was sold at a nonjudicial foreclosure sale and

purchased by Union Street Holdings, LLC (Union Street). After the tenant, South Sound

Charities (Charities), failed to timely vacate the property, Union Street brought an action

for unlawful detainer. The trial court commissioner allowed Charities to continue its

occupation of the property for one month conditioned on Charities making two timely

payments. At the conclusion of the extended occupation, Charities sought a further No. 76015-7-1/2

extension. The trial court denied Charities' request and ordered it to vacate the

property.

Charities appeals raising several procedural claims and asking that this matter be

reversed and its possession restored. While this appeal was pending, Union Street

conveyed the property at issue to a third party. Because we cannot restore Charities'

claimed possession as against the new nonparty owner, we can no longer provide

effective relief. The majority of Charities' claims are therefore moot. To the extent

Charities is seeking recovery of some or all of the payments made during its holdover

occupation, any claim of error was both invited and was not raised before the trial court.

We affirm.

A. Deed of Trust and Foreclosure

Fortune Bank, the predecessor in interest to HomeStreet Bank (HomeStreet),

extended a $3,460,000 loan to Management. The loan was secured with a deed of trust

on the property at 7845 South Pine Street, Tacoma, WA 98409 (the property). The

deed was recorded on November 7, 2011. Management originally leased the property

to South Sound Sports Ventures, Inc.(Ventures) who used the property to operate

indoor adult and youth soccer leagues. The lease between Management and Ventures

was entered on November 4, 2011, and signed by Marian Bowers for both parties.

Fortune Bank approved the lease to Ventures at the inception of the loan. The security

agreement between Fortune Bank and Ventures required Ventures to provide written

notice prior to Ventures changing its legal structure, organization, or name.

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In April 2013, a $492,141 judgment was entered against Ventures that it could

not pay. On June 20, 2013, Ventures terminated its lease and Management entered

into a new lease for the property with Charities. Bowers signed the lease for both

Management and Charities. Charities was organized and operated as a successor to

Ventures.1 Management, Ventures, and Charities were all three managed and/or

owned by Robert and Marian Bowers. Management, Ventures, and Charities did not

seek written approval or provide written notice to Fortune Bank or HomeStreet prior to

entering into the new lease. The lease between Management and Charities was never

recorded.

Shortly after entering the new lease, Management defaulted on its loan from

HomeStreet and filed for Chapter 11 bankruptcy protection. The bankruptcy court

granted HomeStreet, as successor by merger to Fortune Bank, relief from the automatic

stay, thereby authorizing HomeStreet to proceed with its nonjudicial foreclosure of the

property. HomeStreet provided notice of the foreclosure sale to Management, as the

grantor for the deed of trust, Ventures, as the original tenant, and Marian Bowers, who

signed the leases between Management and Ventures and Management and Charities.

On January 8, 2015, HomeStreet assigned the rights and title to the deed of trust

to its wholly owned subsidiary, Union Street Holdings, LLC (Union Street). The

assignment document was notarized January 21, 2015.

The nonjudicial foreclosure sale was conducted on January 16, 2015. The

trustee, RTS Pacific, Inc., granted and conveyed a trustee's deed to the highest bidder,

I On December 19, 2014, a Pierce County court ruled that Charities was a mere continuation of Ventures, and judgment was entered against it for the $492,141. -3- No. 76015-7-1/4

Union Street. The vice president of HomeStreet, stated in her original declaration that

"the bank" had been the purchaser, implying HomeStreet. She corrected this statement

in a later declaration, stressing that she had personally placed the successful bid on

behalf of Union Street, a wholly owned subsidiary of HomeStreet.

B. Procedural History

Because Charities failed to vacate by the 20th day after the foreclosure sale as

required by RCW 61.24.060, on February 9, 2015, Union Street filed a complaint for

unlawful detainer in Pierce County Superior Court. The complaint named Charities,

Management, and Ventures. An order was issued February 11,2015, directing the

defendants to appear on February 18, 2015, and "show cause" why the court should not

issue a writ of restitution restoring Union Street to possession of the property.

Charities submitted a memorandum in opposition to the unlawful detainer action

requesting that the "court should exercise its equitable authority to affirm South Sound

Charities lease or alternatively provide South Sound Charities with a reasonable time to

close out its operations and complete its contracts that were entered into with third

parties in reliance on its right to occupy and operate the Pacific Sports Center."

In its February 18, 2015, order, the trial court commissioner agreed, in part, with

Charities' request, and entered an order extending Charities right to occupy the property

until March 7, 2015, the last day of the ongoing soccer season. The order was

conditioned on Charities making two $22,000 payments to Union Street before March 1,

2015. The order stated that if Charities did not comply, Plaintiff"may appear ex parte

and obtain a writ of restitution." The order also prohibited Charities from soliciting or

entering into other leagues or other activity beyond the March 7, 2015 expiration period.

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Without explanation, the trial court commissioner set the matter over for trial. Trial was

set for March 26, 2015.

Charities did not object to the requirement to make the two $22,000 payments: it

paid $22,000 to Union Street on February 19, 2015 and February 28, 2015. Charities

maintained occupation of the property.

On February 26, 2015, Charities filed a motion requesting that the trial court

permit it to continue operations and occupancy through May 10, 2015. On March 6,

2015, the trial court denied the motion and affirmed that Charities was required to

vacate the property "no later than midnight on March 7, 2015."

On March 7, 2015, a HomeStreet security officer arrived and began changing the

locks. A Charities officer protested this action, stating that he could not proceed without

a writ of restitution. The security officer then called the Tacoma Police Department.

The police were shown the trial court's March 6, 2014, order and threatened to arrest

the Charities officer if he interfered.

On March 12, 2015, Charities filed a motion to dismiss under CR 12(b)(6) and for

lack of jurisdiction. Charities' motion also sought reconsideration of the trial court's

March 6, 2015, order. The trial court denied the motions.

The parties appeared on March 26, 2015, for trial on the unlawful detainer action.

Because Union Street was in possession of the property, the trial court inquired as to

what issues remained. Charities asserted that possession was still at issue. The trial

court disagreed and ordered that Union Street "is entitled to possession of the property

. . . No writ is necessary in light of[Union Street's] possession of the property. The

court ordered that all remaining issues, presumably Charities' affirmative defenses,

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claims for damages, and any counterclaims, would be reserved for a standard civil trial

and set a new trial date.

Charities sought discretionary review on April 17, 2015, which was denied. As

the case neared trial, Union Street sought dismissal of the case without prejudice or

continuance. Charities agreed to dismissal on the condition that it be entered "with

prejudice." Accordingly, the action was dismissed with prejudice on November 20,

2015. Charities' appeal followed.

On July 26, 2016, Union Street sold the property by special warranty deed, and is

thus no longer in possession.

II

A. Standard of Review

The questions before the court on appeal are questions of law and fact. We

review questions of law de novo. Mountain Park Homeowners Ass'n v. Tydinqs, 125

Wn.2d 337, 341, 883 P.2d 1383(1994). Since the record consists entirely of written

material, we stand in the same position as the trial court and review the record de novo.

Housinq Authority of the City of Pasco and Franklin County v. Pleasant, 126 Wn. App.

382, 387, 109 P.3d 422(2005).

B. Mootness

Charities raises seven issues on appeal:(1) whether Union Street was the

purchaser at the trustee sale,(2) whether the trial court erred in not conducting a trial to

determine if there was a proper trustee sale,(3) whether the court commissioner erred

in ordering the payment of rent for continued occupancy,(4) whether Union Street's

acceptance of rent terminated the ability to proceed with an unlawful detainer action,

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(5) whether an unlawful detainer procedure is appropriate where Union Street had

knowledge of Charities' preexisting unrecorded lease,(6) whether the trial court erred in

ordering Charities to vacate without issuance of a writ of restitution, and (7) whether the

trial court erred in not holding a trial on Charities' affirmative defense of equitable

estoppel. With the possible exception of Charities' third issue, all of Charities' claims

seek the same remedy—reversal and restoration of Charities' possession. We must

first determine whether we can provide effective relief.

On August 8, 2016, while this matter was pending on appeal, Union Street filed a

motion to supplement the record pursuant to RAP 9.11 and ER 201, by taking notice of

the recording of a special warranty deed transferring title to the property to a third party

entity. Charities opposed the motion to supplement. On September 9, 2009, the court

commissioner for Division II of this court directed Union Street to file a copy of the deed

with the trial court and file a supplemental designation of clerk's papers. The ruling was

made "without prejudice" to South Sound Charities' ability to move to supplement the

record with evidence demonstrating that the deed was not the result of a bona fide third

party sale. In response, Union Street filed a copy of a special warranty deed recorded

July 28, 2016, conveying the property from Union Street to 2646 South 80th, LLC.

Charities has not offered any evidence disputing the validity of the conveyance. It

therefore appears that Union Street no longer holds title to the property at issue in this

case.

As a general rule, appellate courts "do not consider cases that are moot or

present only abstract questions." State v. Beaver, 184 Wn.2d 321, 330, 358 P.3d 385

(2015). "A case is technically moot if the court cannot provide the basic relief originally

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sought, or can no longer provide effective relief." Josephinium Assocs. v. Kahli, 111

Wn. App. 617, 622, 45 P.3d 627(2002).

Charities argues that its appeal is not moot because it has not conceded the right

of possession. Charities is correct that an unlawful detainer action does not necessarily

become moot simply because the tenant no longer has possession of the premises at

the time of appeal. Pleasant, 126 Wn. App. at 388 (citing Lochridge v. Natsuhara, 114

Wn. 326, 330, 194 P. 974 (1921)). Charities' argument might be persuasive if Union

Street still held title to the property and Charities' claims could be resolved between the

parties before the court. But where, as here, Union Street no longer has title to the

property and the true owner is not a party to Charities' action, we can no longer provide

effective relief. Josephinium Assocs., 111 Wn. App. at 622. See also Kessler v.

Nielsen, 3 Wn. App. 120, 126, 472 P.2d 616(1970)(where landlords were in

possession of the property tenants' claim to possessory right was not moot because the

issue could be "determined vis-à-vis the parties"). Because we cannot provide the relief

Charities seeks—the right to restore its tenancy—Charities' nonmonetary claims are

moot.

C. Payments for Continued Occupation

While Charities' claims seeking possession are moot, it does not mean this case

is entirely moot. If a tenant has a monetary stake in the outcome of the case, such as

payment of rent, damages, and attorney fees, those claims are not moot. McGary v.

Westlake Investors, 99 Wn.2d 280, 284,661 P.2d 971 (1983). While Charities does

not seek damages as part of its assignments of error, it claims on appeal that because

the trial court ordered the payment of $44,000 and Union Street accepted the payment,

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that Union Street should have been precluded from proceeding further. In response to

Union Street's argument that the case is moot, Charities questions: "Moreover there is

the issue that $44,000 in rent was paid. How is it that Union Street gets to take

February and March rent and then kick Charities out on March 7, 2015?" Because this

is, at least impliedly, a claim for damages, we will address it. Charities' claim that the

two $22,000 payments were improper fails for two reasons.

First, Charities invited the error that it now complains about. Pursuant to

RCW 61.24.060, Charities was required to vacate the property by February 5, 2015, the

20th day after the foreclosure sale. After it failed to do so, Union Street filed its

complaint for unlawful detainer and set a show cause hearing for February 18, 2016.

Rather than vacate, Charities instead asked the court to "exercise its equitable authority

to affirm South Sound Charities lease or alternatively provide South Sound Charities

with a reasonable time to close out its operations and complete its contracts that were

entered into with third parties in reliance on its right to occupy and operate the Pacific

Sports Center." The court then exercised its equitable authority and over Union Street's

objection granted Charities the relief it requested by allowing Charities to continue

occupation until March 7, 2016, based on the condition it make two $22,000 payments

to Union Street. Charities did not object, made the two required payments, and

maintained its occupation of the property until March 7, 2015.

The invited error doctrine "prohibits a party from setting up an error at trial and

then complaining of it on appeal." Angelo Property Co. LP v. Hafiz, 167 Wn. App. 789

823, 274 P.3d 1075(2012)(quoting City of Seattle v. Patu, 147 Wn.2d 717, 720, 58

P.3d 273(2002). Charities invited the trial court to exercise its equitable authority and

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allow it additional time to occupy the property and when the court did so conditioned on

payment of $44,000, Charities accepted the court's order, made the payments, and

continued to occupy the property. Charities cannot now complain that the trial court

erred.

Second, to the extent that Charities is claiming that the trial court commissioner

erred in requiring two payments of $22,000 while only allowing Charities to continue its

occupation for one month, Charities failed to make this argument below. In general, we

will not review an issue, theory, argument, or claim of error not presented at the trial

court level. Mukilteo Retirement Apartments, L.L.C. v. Mukilteo Investors, L.P., 176 Wn.

App. 244, 258, 310 P.3d 814 (2013); RAP 2.5(a).2

WE CONCUR:

2 While the record does not explain why the trial court commissioner required two payments of $22,000, we note that the RCW 59.12.170 provides authority for the court to award twice the amount of damages incurred for an unlawful retainer. "The measure of'damages'for unlawful detainer is based on the fair market value of the use of the premises." Sprincin King St. Partners v. Sound Conditioning Club, Inc., 84 Wn. App. 56, 63, 925 P.2d 217(1996). -10-