Mohandessi v. Urban Venture LLC

12 Wash.App.2d 625

459 P.3d 407

Shamim MOHANDESSI; Joseph, Grace, individually as residential owners and derivatively on behalf of 2200 Residential Association, a Washington non-profit corporation, and derivatively on behalf of 2200 Condominium Association, a Washington non-profit corporation, Appellants,

v.URBAN VENTURE LLC, a Washington limited liability company; Vulcan, Inc., a Washington corporation; 2200 Condominium Association, a Washington non-profit corporation; 2200 Residential Association, a Washington non-profit corporation; Gary Zak, an individual, Brian Crowe, an individual; Brandon Morgan, an individual; and John Does 1-15, individuals or entities, Respondents.

No. 77017-9-I consolidated with

No. 77581-2-I

Court of Appeals of Washington, Division 1.

FILED: March 9, 2020

Gregory J. Hollon, Matthew J. Campos, Daniel Mark Weiskopf, Theresa Demonte, McNaul Ebel Nawrot & Helgren PLLC, 600 University St. Ste. 2700, Seattle, WA, 98101-3143, Hozaifa Y. Cassubhai, Bailey Duquette, 500 Union St. Ste. 800, Seattle, WA, 98101-4051, Jeffrey E. Bilanko, Carroll, Biddle, & Bilanko, PLLC, 801 2nd Ave. Ste. 800, Seattle, WA, 98104-1573, Ronald Guy Housh, Attorney at Law PS, 1420 5th Ave. Ste. 3000, Seattle, WA, 98101-2393, Catherine Wright Smith, Ian Christopher Cairns, Smith Goodfriend PS, 1619 8th Ave. N, Seattle, WA, 98109-3007, for Appellant.

Lawrence A. Costich, Milt Reimers, Schwabe Williamson & Wyatt PC, 1420 5th Ave. Ste. 3400, Seattle, WA, 98101-2339, Hozaifa Y. Cassubhai, Bailey Duquette, 500 Union St. Ste. 800, Seattle, WA, 98101-4051, Gregory J. Hollon, Daniel Mark Weiskopf, Theresa Demonte, Matthew J. Campos, McNaul Ebel Nawrot & Helgren PLLC, 600 University St. Ste. 2700, Seattle, WA, 98101-3143, Claire Martirosian, Attorney at Law, 600 University St. Ste. 2700, Seattle, WA, 98101-4151, John Curtis Dippold, Stanley J. Terry, Parker R. Keehn, Carney Badley Spellman, P.S., 701 5th Ave. Ste. 3600, Seattle, WA, 98104-7010, Jennifer Lynn Campbell, Schwabe Williamson & Wyatt PC, 1420 5th Ave. Ste. 3400, Seattle, WA, 98101-2339, for Respondent.

John Curtis Dippold, Stanley J. Terry, Parker R. Keehn, Michael Barr King, Jason Wayne Anderson, Carney Badley Spellman, P.S., 701 5th Ave. Ste. 3600, Seattle, WA, 98104-7010, Lawrence A. Costich, Milt Reimers, Jennifer Lynn Campbell, Schwabe Williamson & Wyatt PC, 1420 5th Ave. Ste. 3400, Seattle, WA, 98101-2339, Ronald Guy Housh, Attorney at Law PS, 1420 5th Ave. Ste. 3000, Seattle, WA, 98101-2393, Jeffrey E. Bilanko, Carroll, Biddle, & Bilanko, PLLC, 801 2nd Ave. Ste. 800, Seattle, WA, 98104-1573, Catherine Wright Smith, Ian Christopher Cairns, Smith Goodfriend PS, 1619 8th Ave. N, Seattle, WA, 98109-3007, Stephan O. Fjelstad, Allison Nicole Peryea, Leahy Fjelstad Peryea, 901 5th Ave. Ste. 820, Seattle, WA, 98164-1005, for Respondent/Cross-Appellant.

Anthony L. Rafel, Rafel Law Group PLLC, 4126 E. Madison St., Suite 202, Seattle, WA, 98112, for Amicus Curiae on behalf of Community Associations Institute.

PUBLISHED OPINION

Mann, A.C.J. ¶1 This case concerns condominium assessments. Shamim Mohandessi and Joseph Grace (collectively plaintiffs) appeal the trial court’s dismissal of their claims against the 2200 Residential Association (RA), the 2200 Condominium Association, Gary Zak, Brian Crowe, and Brandon Morgan (collectively MA), Urban Venture LLC, and Vulcan, Inc., (all collectively defendants). The plaintiffs brought direct and derivative claims alleging that the defendants violated the Washington Condominium Act (Condominium Act), chapter 64.34 RCW, the Washington Consumer Protection Act (CPA), chapter 19.86 RCW, breached statutory and fiduciary duties, and tortiously interfered with the MA Board’s duties.

¶2 The plaintiffs contend that the trial court erred in (1) concluding that the statute of limitations barred their claims, (2) concluding that they could not bring claims derivatively on behalf of the RA and MA, (3) concluding that they lacked standing to bring claims against the MA for violations of the Condominium Act, (4) dismissing their breach of contract claims against the RA, (5) sua sponte dismissing their claim that a prior 2012 settlement agreement was void as the product of fraud and collusion, (6) awarding fees under the 2012 settlement agreement and costs under the Uniform Declaratory Judgment Act, RCW 7.24.100. The defendants cross appeal and argue that the trial court erred: (1) in concluding that the common expense liability allocation in the master declaration violates the Condominium Act, RCW 64.34.224(1) and (2) in not awarding their full attorney fees under the 2012 settlement agreement, or alternatively, under the Condominium Act.

¶3 We affirm the trial court’s dismissal of all claims against the RA, Urban Venture, and Vulcan. We affirm the trial court’s conclusion that the master declaration violated the Condominium Act because the allocation of common expenses violates RCW 64.34.224(1). We reverse the trial court’s dismissal of the plaintiffs’ claims against the MA for violations of the Condominium Act.

¶4 We affirm the trial court’s award of attorney fees under the 2012 settlement agreement in favor of the RA, Urban Venture, and Vulcan. We vacate the award of attorney fees in favor of the MA.

¶5 Affirmed in part, reversed in part.

I.

2200 Westlake

¶6 This appeal concerns a mixed-use development located at 2200 Westlake Avenue in downtown Seattle (2200 Westlake) comprising of over 500,000 gross square feet, excluding underground parking. Milliken Urban Limited Partnership (Milliken) began the development of 2200 Westlake. Urban Venture LLC, a subsidiary of Vulcan Inc., invested in the project and developed it jointly with Milliken. Urban Venture bought out Milliken’s interest midway through construction in 2005.

¶7 The development was completed in 2006. That same year Urban Venture executed and recorded a "master declaration" under the Condominium Act, creating a four-unit condominium called "2200, a condominium." The four units are comprised of: (1) the commercial unit, which leases 90,000 square feet of commercial retail shops; (2) the hotel unit, housing the 153-room Pan Pacific Hotel; (3) the food unit, leased to Whole Foods grocery store; and (4) the residential unit, comprised of 259 residential units, which has a separate sub-condominium association.

¶8 2200 Westlake is governed by, and acts through, the 2200 Condominium Association, a nonprofit corporation, which the parties refer to as the Master Association (MA).¹ The owner of each unit of 2200 Westlake is a member of the MA. The MA is administered by a four-person board, with each owner electing one representative to hold the single vote allocated to each owner.

¶9 In 2006, Urban Venture also recorded a separate declaration for the 259-unit residential unit of 2200 Westlake. The "residential declaration" covers the 2200 Residential Association (RA). The RA is also organized as a nonprofit corporation. The RA board is elected by a majority of the residential unit owners. The RA board chooses a single member to represent it on the MA Board.

¶10 Urban Venture owned the commercial, hotel, and food store units from completion of the project, until selling the units to third parties: the commercial unit in March 2016, the food store unit in September 2016, and the hotel unit in February 2017. During Urban Venture’s ownership, the MA board members were Vulcan employees, appointed by Urban Venture. The initial board members were Gary Zak, Hamilton Hazlehurst, and Brian Crowe.

¶11 Central to this litigation is the common expenses associated with the common elements of 2200 Westlake and the division of the common expenses between the four condominium units in the MA. The master declaration defines the "Common Elements" as "all portions of the Property and the Project which are outside the boundaries of a Unit, and improvements within the boundaries of a Unit which are designated as Common Elements or Limited Common Elements under the provisions of Article 3." "Common Expenses" are defined as:

expenditures made by, or financial liabilities of the Association, together with any allocations to reserves. Common Expenses are funded by each Owner in accordance with its Allocated Interest, except that certain Common Expenses are specifically allocated to fewer than all Units or are specially allocated among Units based on usage or benefit, as more specifically set forth in Section 10.4.

Common Expense Liability

¶12 The common expense liability, and interest in the common elements, are determined by the units’ declared value, which results in the "Allocated Interest Percentage." Exhibit B to the MA declaration shows the unit data and allocated interests for each unit.

  Unit Name              Unit Floor         Declared Value     CEL/ICE     Votes     Parking
                         Area (Sq. Ft.)                                              Spaces
  Unit C                 24,352             $11,340,000        6.3         1         90 covered
  (Commercial                                                                        36 uncovered
  Unit)
  Unit R                 259,447            $138,960,000       77.2        1         318 covered
  (Residential Unit)
  Unit H (Hotel          120,309            $18,000,000        10.0        1         55 covered
  Unit)                                                                              2 uncovered
  Unit F (Food           43,616             $11,700,000        6.5         1         272 covered
  Store Unit)                                                                        12 uncovered
  Total                                     $180,000,000       100%        4

¶13 "Declared value" is defined as "the value of each Unit as stated in Schedule B, which does not necessarily reflect market value and will not be affected by sales price."

In contrast, the preamble to the MA declaration indicates that concerns about fair governance for all units...