Corliss v. Hughes

HARRY and BETTY MAY CORLISS, husband and wife;TIMOTHY CORLISS; and SCOTT CORLISS, as individualsand derivatively on behalf of WASHINGTON ROCK QUARRIES, Appellants, v. LARRY P. HUGHES and JANE DOE HUGHES,husband and wife and their marital community;HARRY HART and BETH HART, husband and wifeand their marital community, Respondents.

No. 69432-4-I

COURT OF APPEALS FOR THE STATE OF WASHINGTON DIVISION ONE

FILED: February 18, 2014

UNPUBLISHED OPINION

SPEARMAN, A.C.J. — The main issue on appeal is whether the trial court properly granted the summary judgment motions of Larry and Jane Doe Hughes and Harry and Beth Hart, thereby dismissing the lawsuit of Harry, Betty, Timothy, and Scott Corliss¹ and Washington Rock Quarries, Inc. (WRQ) under the statute of limitations. Larry Hughes and Harry Hart, together with Harry, Timothy, and Scott Corliss, own WRQ. The lawsuit, alleging claims for usurpation of a corporate opportunity, negligent misrepresentation, and breach of fiduciary duty,was based primarily on Hughes and Hart's purchase of the King Creek Pit and Kapowsin Quarry, property in which WRQ conducted its mining business, without informing the Corlisses and without offering WRQ the opportunity to purchase the property. The Corlisses contend the trial court erred in ruling as a matter of law that they were put on notice of their claims by (1) Larry Hughes' September 2005 letter to Harry Corliss and (2) information received by John Carrosino, the Corlisses' alleged agent, in 2007. We conclude that (1) Harry Corliss had notice through the September 2005 letter but there is an issue of material fact as to whether he was a director of WRQ or a mere shareholder at the time; (2) there is an issue of material fact regarding whether statements to Carrosino bound the Corlisses; and (3) the Corlisses' claims based on a post-sale amendment to the King Creek lease and the re-permitting of the King Creek Pit were properly dismissed for other reasons. We reverse in part, affirm in part, and remand.

FACTS

WRQ is in the business of mining and selling sand, gravel, and rock. Until 1993, its stock was owned 50 percent by Harry Hart (Hart) and 50 percent by Edward Duggan. That year, Larry Hughes (Hughes) learned of the opportunity to purchase Duggan's shares and informed his friend Harry Corliss (Harry).² Harry indicated his desire to purchase half of Duggan's shares but requested that they be registered primarily in the name of his sons, Timothy (Tim) and Scott (Scott) Corliss. The Corlisses and Hughes purchased Duggan's WRQ stock, and the shares were thereafter owned as follows: Hart - 50 percent; Hughes - 25percent; Tim - 12.25 percent; Scott - 12.25 percent; and Harry - 0.50 percent. The Corlisses own their stock as individuals.

Since 1993, Hart has been WRQ's president and Hughes has been its secretary/treasurer. Scott was WRQ's vice president from 1993 until 2004 or 2007. Hughes, Hart, and Beth Hart have held three of the four seats on the board of directors. Harry was a director from 1993 until sometime in 2004 to 2006, when he was replaced by Scott due to deteriorating health.³

WRQ leased the King Creek Pit and the Kapowsin Quarry (collectively, "the pits") from International Paper (IP) until 2005. In 2003, IP notified WRQ that it would be cancelling the leases, leaving WRQ with five years to operate in the pits. Hughes and Hart, without informing the Corlisses, negotiated with IP to buy the pits and, in June 2005, formed Rainier Resources, LLC (RR) for that purpose. RR is owned equally by the Hughes and Hart families. RR purchased the King Creek pit (for $4,000,000) and Kapowsin pit (for $3,000,000), closing the sales on September 22, 2005 and March 30, 2006, respectively. Since the purchases, RR has honored IP's leases with WRQ and has not changed their terms, with the exception of adding a "backhaul" provision to the King Creek lease in September 2005. Hughes and Hart also re-permitted the King Creek pit so that a greater area of the pit could be mined. WRQ paid the re-permitting costs.

On or about August 19, 2005, Scott sent Hughes a letter regarding WRQ. The letterhead stated "Corliss Resources" and the footer of the letter included theaddress "P.O. Box 487, Sumner, Washington 98390." Clerk's Papers (CP) at 122. On September 2, Hughes responded by letter addressed to "Harry B Corliss, Corliss Resources, P.O. Box 487, Sumner, WA 98390," though its salutation was "Dear Scott."⁴ Hughes wrote, "You also should be aware that I have purchased the gravel pit and the rock quarry from International Paper. I will honor the terms of the lease International Paper has with Washington Rock."⁵ CP at 116, 150.

In 2007, as part of estate planning for Harry and Betty and to gather information about the Corliss family's investment in WRQ, Scott asked John Carrosino, the president of Corliss Resources, Inc. (CRI, a company owned by Tim, Scott, and Harry), to learn more about WRQ and its value. Carrosino met with Hart on April 5, 2007. After the meeting, Carrosino requested copies of the leases for the pits. Sometime between April 5 and May 8, Hughes told Carrosino that he and Hart had purchased the pits. On May 8, however, Hart gave Carrosino the original leases showing IP as the lessor/landholder. That day, Carrosino emailed Hart, expressing confusion over the inconsistency between the documents showing IP was the owner of the land and Hughes' and Hart's statements in conversation that they owned the pits. He requested Hart's help in clarifying who owned the pits. The next day, Carrosino had a phone conversation with Hart, who did not state the leases were incorrect or that he and Hughes hadpurchased the pits. Carrosino continued to seek information about ownership. In a June 6 email to Hart, Carrosino wrote,

The two pieces of material I do not have and would very much like to get from you is the actual purchase of the real estate under the two pits operating at Washington Rock and the related amended or assigned leases with related royalty agreements. I would like to have copies of the documents that support the leases you and Pat have as land owners with Washington Rock as compared to the old leases with the prior owners that are now no longer the land lords [sic].

CP at 43. Hart never gave the requested documents to Carrosino. Concluding that Hughes and Hart did not own the pits, Carrosino did not inform any of the Corlisses of Hughes' and Hart's statements that they had purchased the pits. According to Scott's and Tim's declarations, Scott learned of the purchase of the pits in April 2009 when Hart told him during a meeting that Hughes purchased the pits, and Tim learned of the purchase after that meeting.⁶

On February 8, 2012, the Corlisses, individually and derivatively on behalf of WRQ, brought an action against Hughes and Hart, alleging that they never informed the Corlisses of the negotiations or purchase of the pits or of the re-permitting of the King Creek pit. The complaint alleged claims for usurpation of a corporate opportunity, negligent misrepresentation, and breach of fiduciary duty. Hughes and Hart filed motions for summary judgment based on the three-year statute of limitations under RCW 4.16.090. They argued that the Corlisses had notice of their claims in 2005 from Hughes' letter and in 2007 through Carrosino. The trial court granted both Hughes' and Hart's motions. It denied the Corlisses' motion for reconsideration. The court awarded Hughes and Hart attorney's feesand expenses under RCW 23B.07.400. The Corlisses appeal from the orders granting summary judgment and awarding attorney's fees.

DISCUSSION

Statute of Limitations

The Corlisses contend the trial court erred in ruling that their claims were barred by the statute of limitations.⁷ We review summary judgment de novo. Jones v. Allstate Ins. Co., 146 Wn.2d 291, 300, 45 P.3d 1068 (2002). The parties agree that all claims are governed by RCW 4.16.080(4), which states that a three-year statute of limitations applies to "[a]n action for relief upon the ground of fraud, the cause of action in such case not to be deemed to have accrued until the discovery by the aggrieved party of the facts constituting the fraud." The statute begins to run when the plaintiff discovers, or by reasonable diligence would have discovered, the cause of action. First Maryland Leasecorp v. Rothstein, 72 Wn. App. 278, 282, 864 P.2d 17 (1993). The question of when the plaintiff discovered or could have discovered such facts is one of fact. Sherbeck v. Estate of Lyman, 15 Wn. App. 866, 869, 552 P.2d 1076 (1976). The party seeking to toll the statute of limitations based on the discovery rule has the burden to show the fraud could not have been discovered until three years before the commencement of the action. Interlake Porsche & Audi, Inc. v. Bucholz, 45 Wn. App. 502, 518, 728 P.2d 597 (1986).

I. September 2005 letter

The Corlisses contend there are multiple questions of fact involving Hughes' 2005 letter, including whether Harry received the letter and whether he was competent enough in 2005 to understand it.⁸ But we conclude that this issue is not properly before us. As Hughes notes, these arguments were made for the first time in the Corlisses' motion for reconsideration. These arguments were not closely related to a position asserted previously and depended on new facts; thus, they are not properly before this court.⁹ River House Dev. Inc. v. Integrus Architecture, P.S., 167 Wn. App. 221, 231, 272 P.3d 289 (2012) (party bringing motion for reconsideration may preserve issue for appeal that is closely related to position previously asserted and does not depend on new facts). The trial courtdid not err in ruling on summary judgment that Hughes' letter gave Harry notice of the purchase of the pits in 2005.

II. Hughes' and Hart's statements to Carrosino

The Corlisses contend there are genuine issues of material fact in dispute regarding whether Carrosino received notice of the purchase of the pits...