Frye v. JDH Inv. Grp. LLC

BETTY FRYE, an individual; and TODD DUTY, an individual, Appellants, v. JDH INVESTMENT GROUP LLC, a Nevada LLC; THOMAS J. DOWNIE,individually and on behalf of his marital community; Respondents,BLAKE HADDOCK, individually and on behalf of his marital community;and RANDALL JACKSON, individually and on behalf of his marital community, Defendants.

No. 79318-7-I

COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION ONE

April 6, 2020

UNPUBLISHED OPINION

CHUN, J. — This case regards a dispute over promissory notes as well as tort and contract claims concerning real estate. Betty Frye and Todd Duty¹ sued JDH Investment Group, LLC, and Thomas Downie (respondents). Frye claimed fraud, obtaining money or property under false pretenses, elder abuse, intentional infliction of emotional distress, legal malpractice, civil conspiracy, violations of the Washington Consumer Protection Act, negligentmisrepresentation, and breach of contract. Frye also filed a lis pendens. JDH and Downie counterclaimed for tortious interference with a business expectancy. JDH also counterclaimed for breach of contract, breach of the implied duty of good faith, and slander of title, and requested damages and release of the lis pendens.

After a bench trial, the trial court dismissed Frye's claims and ruled in favor of JDH and Downie on their counterclaims. Frye appeals. For the reasons discussed herein, we affirm.

I. BACKGROUND

A. Facts

Frye sold undeveloped property in Auburn (Auburn property) to JDH for $3 million on June 14, 2013. As a part of the sale, Frye received $2 million in cash and two promissory notes (Auburn notes)—each for $500,000 and secured by the Auburn property. One of the Auburn notes would mature on December 14, 2013, and the other would mature on June 14, 2014. JDH is the obligor on the Auburn notes. The Auburn notes state that they bear five percent interest per annum "until paid," with six percent late charges. As a part of the transaction, one of JDH's members, Sue Jones, personally extended the $2 million that went to Frye, treating the funds as a loan to JDH with the Auburn property as collateral.

Also on June 14, 2013, Frye loaned $1.55 million to Northshore Montessori, Inc., a daycare business run by Downie, who was also a foundingmember of JDH.² Downie's attorney, Randall Jackson, prepared the promissory note from the daycare (Daycare note).³ Jackson claims that neither Frye requested nor Downie offered a personal guarantee. After Downie signed the note as Northshore Montessori's president, but before delivering it to Frye, Jackson noticed language stating that Downie personally guarantees the Daycare note. Jackson crossed out the language and then gave the note to Frye. Jackson claimed that he used a template to draft the Daycare note and that he mistakenly included personal guarantee language that he used in a prior transaction.

Between October and November of 2014, Frye also personally loaned $85,000 to Downie through two notes.

On February 8, 2017, JDH received preliminary plat approval for the Auburn property. By this time, the Auburn notes were several years overdue. Downie, by then the sole member of JDH, attempted to refinance the loans on the property with Pyatt Broadmark Management, LLC. Pyatt placed $5.8 million in escrow in anticipation of the refinancing. As part of the closing process, the escrow company needed a payoff quote from Frye indicating the amount due under the Auburn notes and a release of her deeds of trust. In May 2017, Downie and Jackson approached Frye on behalf of JDH and tendered $1.2 million—$500,000 for each note, plus five percent interest—in exchange for her release of the Auburn notes. But Frye argued the 12 percent statutory interestrate applied to the Auburn notes since they were post-maturity, and demanded $1.5 million. Frye increased her demand to $1.6 million, then $1.7 million, stating she could charge whatever she wanted, since the refinancing depended on her releasing the Auburn notes. JDH, bewildered by Frye's demands, refused to pay more than $1.2 million. When it became apparent to Pyatt that the parties had deadlocked, it withdrew its refinancing offer.

On June 14, 2017, JDH received a letter of intent to purchase the Auburn property from Toll Brothers, who proposed a purchase price of $7.8 million.

B. Procedural History

On August 23, 2017, Frye filed a lis pendens referencing the Auburn property and an associated complaint.

The next day, Frye sued JDH and Downie.⁴ Frye's suit claimed: against Downie, elder abuse, intentional infliction of emotional distress, and breach of contract for nonpayment on the personal loans and the Daycare note; and against all defendants, civil conspiracy, fraud, false pretenses, violations of the Washington Consumer Protection Act, and negligent misrepresentation. Frye pleaded for damages, injunctive relief to prevent sale of the Auburn property or use of it as collateral, rescission of the deeds and return of the property, interest, and attorney fees.

JDH and Downie counterclaimed for tortious interference with a businessexpectancy; JDH counterclaimed for breach of contract, breach of the implied duty of good faith, slander of title, unjust enrichment, and also requested damages, a declaratory judgment on the amounts owed on the Auburn notes, and release of the lis pendens.

The matter proceeded to a bench trial. During closing argument, Downie conceded that he owed $85,000 on the personal notes to Frye, plus 12 percent interest.

On November 5, 2018, the trial court dismissed Frye's claims and ruled in favor of JDH and Downie on their tortious interference counterclaim, and in favor of JDH on their breach of contract, breach of implied duty of good faith, and slander of title counterclaims. The trial court also declared that JDH owed $1.2 million on the Auburn notes, since they bore five percent interest even after maturity and the late fees provision on the notes was unenforceable. The trial court also found that Downie did not personally guarantee the Daycare note, and since Northshore Montessori was not a party to the action, dismissed Frye's claim to recover under the Daycare note. Finally, the trial court awarded JDH and Downie attorney fees. After subtracting the damages from the counterclaims and attorney fees from the amounts owed on the Auburn notes, the trial court concluded that JDH owed $646,908 to Frye. After subtracting damages and attorney fees from the amounts owed on his personal notes to Frye, the trial court concluded that Downie owed Frye $12,801. Frye appeals.

II. ANALYSIS

When reviewing a trial court's findings of fact and conclusions of law, we limit review to whether substantial evidence supports the findings of fact and whether the findings of fact support the conclusions of law. Douglas v. Visser, 173 Wn. App. 823, 829, 295 P.3d 800 (2013). "Substantial evidence is evidence sufficient to persuade a fair-minded, rational person of the declared premise." Douglas, 173 Wn. App. at 829. Additionally, we defer to a trial court's determinations of the weight and credibility of the evidence. Mueller v. Wells, 185 Wn.2d 1, 9, 367 P.3d 580 (2016).

RAP 10.3(g) requires appellants to make specific assignments of error to the trial court's findings of fact, with reference to the finding by number. We "will only review a claimed error which is included in an assignment of error or clearly disclosed in the associated issue pertaining thereto." RAP 10.3(g). "RAP 10.3 requires an appellant to present argument to the reviewing court as to why specific findings of fact are in error and to support those arguments with citation to relevant portions of the record." In re Disciplinary Proceeding Against Burtch, 162 Wn.2d 873, 895, 175 P.3d 1070 (2008). Where an appellant "fail[s] to pinpoint any argument as to why specific findings of fact are not supported by substantial evidence . . . [,] [we need not] unearth arguments from the record for the benefit of an appellant." Burtch, 162 Wn.2d at 896. "Assignments of error not argued or further referred to in a brief are treated as abandoned." In re Estate of Wimberley, 186 Wn. App. 475, 503, 349 P.3d 11 (2015). Unchallenged findings of fact are verities on appeal. Mueller, 185 Wn.2d at 9.

Frye assigns error specifically to six of the trial court's findings of fact—69, and 76 through 80—and three of its conclusions of law—66, 67, and 85. Frye assigns error generally to the remaining findings of fact and conclusions of law in her assignments of error. Throughout the argument section of her brief, Frye makes additional assignments of error to the trial court's conclusions of law and findings of fact. We treat those findings of fact not specifically identified by Frye in her assignment of error or argument section as verities.

A. Amounts Owed on Notes to Frye

Frye argues that the trial court improperly calculated the amounts owed on the Auburn notes. First, she asserts that the trial court mistakenly concluded that a five percent interest rate applies to the matured notes, instead of the statutory twelve percent rate; she contends the parties did not agree on a post-maturity interest rate. Second, she argues that the trial court erroneously concluded that the six percent late charges for missed balloon payments in the Auburn notes constitute an unenforceable penalty. Third, she argues that, if a 12 percent interest rate applied to the notes post-maturity or late charges applied, then the trial court improperly determined that JDH's $1.2 million tender stopped interest from accruing on the Auburn notes. JDH disagrees. We conclude that a five percent interest rate applied to the Auburn notes post-maturity, that the six percent late charges constituted unenforceable penalties, and that the $1.2 million tender stopped interest from accruing on the notes.

1. Post-Maturity Interest Rate

The trial court concluded that, because the Auburn notes state that they bear five percent interest "until paid,"...