Ferguson v. Kruger

5 Wn.App.2d 1024

CHADWICK and APRIL FERGUSON, and CARING HANDS PRESCHOOL, Appellants, v. CORA KRUGER, MARTHA STANDLEY, CHUCK STANDLEY, LEAH CAPILI, ANTONIO CAPILI, CAMMEY ROCCO, RALPH ROCCO, NANCY MANGLONA, ED MANGLONA, JODY HITCHINGS, CHRIS HITCHINGS, LAURA THOMPSON and marital community of, MICHAEL SCHMITT and marital community of, HELANA CODDINGTON, ERIN BELL, JEFFREY BELL, NATASHA SOUDER, ROSE JOHNSTON, YVETTE CLINE, WASHINGTON STATE DEPARTMENT OF EARLY LEARNING, WASHINGTON STATE DEPARTMENT OF SOCIAL AND HEALTH SERVICES, Defendants, MARILYN WALSH and JACK WALSH, Respondents.

No. 49723-9-II

Court of Appeals of Washington, Division 2

September 25, 2018

UNPUBLISHED OPINION

MAXA C.J.

April and Chadwick Ferguson appeal the trial court's summary judgment order dismissing their claims against Marilyn and Jack Walsh relating to a lease agreement between the parties for a property the Walshes own. The Fergusons filed a complaint against the Walshes and several other parties relating to the operation and licensing of the Fergusons' childcare business on the leased property.

We hold that the trial court did not err in (1) certifying the summary judgment order as final under CR 54(b) despite the fact that additional claims against other parties remained unresolved; (2) denying the Fergusons' CR 56(f) motion to continue the Walshes' summary judgment motion; (3) dismissing on summary judgment the Fergusons' claims for breach of contract, unjust enrichment, breach of the covenant of quiet enjoyment, constructive eviction, and civil conspiracy; and (4) awarding the Walshes their reasonable attorney fees under RCW 4.84.185 based on a finding that the Fergusons' claims were frivolous.

Accordingly we affirm the trial court's summary judgment order dismissing the Fergusons' claims and the trial court's award of attorney fees to the Walshes. We also award the Walshes their reasonable attorney fees on appeal for all claims except for unjust enrichment and civil conspiracy.

FACTS

Lease Agreement and Termination

The Walshes own a building in Sequim. Marilyn^[1] operated a state-licensed pre-school and childcare business in the building for 22 years. In 2006, the Walshes leased the building to a third person. That person vacated the building in 2012, and the Walshes advertised the building for rent.

In April 2012, the Fergusons agreed to lease the building and signed a lease agreement with the Walshes. The Fergusons previously had operated a childcare center at another location and intended to open a new childcare center in the building. The lease stated that the Fergusons wanted to "lease the premises for the purpose of conducting a child day care and preschool." Clerk's Papers (CP) at 388. The lease further stated, "The premises are to be used for the purposes of a child day care and pre-school. Lessee shall restrict its use to such purposes, and shall not use or permit the use of the premises for any other purpose without the written consent of [the Walshes]." CP at 389. But the lease did not expressly warrant that the building was suitable for use as a childcare center.

The lease provided for an initial period of four one-month terms beginning in May, with the lease to automatically renew for a year beginning September 1. The rent was $500 per month during the first four-month period and $1, 500 per month thereafter.

In order to begin operations, the Fergusons required business and building licenses. This process included approvals from the Washington Department of Early Learning, the health department, and the fire marshal. Generally it takes at least 90 days to obtain the necessary licenses. In July, the fire marshal unexpectedly required the installation of an automatic fire suppression system before the building could be licensed. Such a system had not previously been required. The Walshes contracted for the system to be installed at their expense.

As part of the fire suppression system, the attic had to be reinsulated. The parties agreed that Chadwick would provide labor at a reduced rate, with the Walshes providing the necessary materials. The Walshes agreed to compensate the Fergusons for this work.

The Fergusons intended to open their childcare center no later than September, and specifically before school started. However, the required building improvements caused a delay in obtaining the necessary licenses. The Fergusons' childcare center opened for business on September 19.

The Fergusons operated a childcare center in the building for almost two and a half years. In February 2015, the Department of Early Learning suspended the Fergusons' childcare license and shut down the business.

Throughout their tenancy, the Fergusons were not current on their rent payments. By March, the Walshes calculated that the Fergusons' arrearages for rent and utilities combined to exceed $9, 000. The parties initially attempted to negotiate an alternative payment plan, but the Fergusons did not make the first required payment in March. On March 16, the Walshes served a three-day notice for the Fergusons to pay rent or vacate the premises. The Fergusons vacated the property and were deemed to have abandoned the building and their lease on April 3.

Lease with Fergusons' Employees

In 2014, before the Fergusons' license had been revoked, two of the Fergusons' employees, Helena Coddington and Erin Bell, asked the Walshes whether the lease could be transferred if they purchased the business from the Fergusons. The employees did not purchase the business, and there were no additional conversations about leasing until after the Fergusons abandoned the property. However, in April 2016, the Walshes signed a lease for the building with Coddington and Bell.

Fergusons' Complaint

In December 2015, the Fergusons filed a complaint in Kitsap County against the Walshes and a variety of other defendants including Coddington, Bell, and employees of the Department of Early Learning. The complaint stated several causes of action specifically against the Walshes, as well as causes of action against other defendants relating to the Fergusons' license suspension.

After some procedural matters were resolved, the Fergusons filed a timely amended complaint in Clallam County on May 26, 2016. The Fergusons asserted 16 causes of action related to the lease of the childcare center, including that the Walshes breached the lease agreement by failing to have the building suitable for its intended purpose as a childcare center, were unjustly enriched by work the Fergusons did on the property constructively evicted the Fergusons by requiring unfair amounts of rent and requiring the Fergusons to perform duties not required by contract, and conspired with Coddington and Bell to transfer the business and building to the Fergusons' employees.

Summary Judgment Order

The Walshes filed an answer on June 10, and on June 30 filed a motion for summary judgment as to all claims applicable to them. The parties twice continued the summary judgment hearing, ultimately to September 16. The Fergusons then filed a CR 56(f) motion to continue the summary judgment motion arguing that they had insufficient time to conduct discovery after filing their amended pleading. The Fergusons noted that they had been waiting to begin discovery until the parties' pretrial issues had been resolved, and submitted an affidavit identifying evidence they intended to produce.

The trial court denied the Fergusons' motion to continue the summary judgment motion. The court stated that the Fergusons had not shown a reasonable basis for failing to provide responsive declarations, and had not shown that witnesses were unavailable to provide timely affidavits or declarations. The court added that the information sought by the Fergusons in their proposed discovery would not raise a material issue of fact on any claim against the Walshes.

The trial court granted the Walshes' summary judgment motion. The court ruled that the Fergusons had not presented any evidence that supported any of their claims against the Walshes. The trial court also found that the Walshes were entitled to an award of attorney fees and costs under RCW 4.84.185. The court found that the action considered in its entirety was frivolous, and that the Fergusons' claims against the Walshes were not supported by any rational argument in law or fact. The court also noted that paragraph 25.1 of the lease agreement provided for an award of attorney fees. The court awarded the Walshes attorney fees and costs totaling $11, 142.75.

The trial court found that there was no just reason for delay in entering judgment dismissing the claims against the Walshes. The trial court later entered written findings under CR 54(b), allowing for entry of final judgment as to some but not all of the action's parties or claims.^[2] The court found that the Fergusons' claims against the Walshes were almost entirely separate from any claims against the other defendants. The only cause of action that included other defendants was the allegation of civil conspiracy, but the trial court found there was no evidence to support that allegation. The court also found,

3. Based upon the record before the Court, . . . the remaining issues before the Court do not involve [the Walshes]. Future action in the case will not change the Court's ruling to dismiss the claims against [the Walshes]. The questions remaining before the trial court do not involve the issues on appeal.

4. An appeal by Ferguson of the order dismissing [the Walshes] will not delay the trial of the remaining issues. The dismissal of [the Walshes] simplified the issues for trial. Had [the Walshes] not been dismissed, it is likely that the causes of action against them would have been severed and heard in a

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