UMPQUA Bank v. Gunzel

UMPQUA BANK, Appellant, v. CHARLES A. GUNZEL, III, and GINELLE F. GUNZEL, husband and wife, Respondent.

No. 38653-8-III

Court of Appeals of Washington, Division 3

February 23, 2023

UNPUBLISHED OPINION

Staab J.

Umpqua Bank appeals from a judgment for attorney fees entered by the superior court after Umpqua dismissed its complaint against Charles and Ginelle Gunzel for breach of contract and fraudulent transfer.^[1] Simultaneous to filing its complaint Umpqua Bank filed a lis pendens associated with the fraudulent transfer claim against property in Ginelle's name. The contract in question provided for attorney fees and contained a choice of law provisions, applying Oregon law to any disputes. Following voluntary dismissal of the complaint and lis pendens, Charles was granted his attorney fees under the contract and RCW 4.28.328.

Umpqua Bank appeals the award, arguing that the superior court erred in applying Oregon substantive law to find that Charles was a prevailing party and Washington procedural law in determining that Charles's request for fees was timely. Umpqua Bank also challenges the award of fees for the fraudulent transfer claim and associated lis pendens. Charles requests his attorney fees on appeal. We affirm the superior court's award of attorney fees. We grant Charles' request for fees on appeal associated with the breach of contract claim but exercise our discretion to deny attorney fees on appeal associated with the lis pendens claim.

BACKGROUND

In a separate lawsuit initiated in 2019, Umpqua Bank brought an action against Charles and Ginelle Gunzel, as husband and wife, to enforce a personal guaranty executed by Charles for his company, Cornerstone Building Co. The superior court determined that the Gunzel marital community and Ginelle individually were not properly a part of the action because the contract predated the marriage. The contract at issue contained a provision regarding the governing law:

This Guaranty will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Oregon without regard to its conflicts of law provisions.

Clerk's Papers (CP) at 245. The contract also contained a provision providing for an award of attorney fees and costs to Umpqua Bank related to litigation of the contract. This included fees and costs related to "any and all appeals." CP at 245.

In the summer of 2019, while the original action was still pending the attorneys for each party discussed settlement, including Charles' solvency and the property he owned. When Umpqua Bank indicated that Charles had recently sold or transferred property on Nottingham Drive (Nottingham Property) Charles' attorney indicated that the property was Ginelle's separate property from a prior divorce and provided a title history on the property.

Meanwhile, both parties filed motions for summary judgment, and the superior court granted Umpqua Bank's motion in January 2020, determining that the personal guaranty was enforceable against Charles. Umpqua Bank v. Gunzel, 16 Wn.App. 2d 795, 800-01, 483 P.3d 796 (2021). Umpqua Bank subsequently recorded a judgment against the Gunzels' real property.

Charles appealed from summary judgment, and ultimately this court determined that Umpqua Bank's claim failed on statute of limitations grounds. Id. at 816. Accordingly, this court reversed and remanded for the superior court to grant summary judgment in favor of the Gunzels. Id.

In February 2021, while the appeal in the original action was still pending, Umpqua Bank brought a separate action against Charles and Ginelle Gunzel for fraudulent transfer and breach of contract. Umpqua Bank alleged that Charles had fraudulently conveyed real property on Nottingham Drive (Nottingham Property) that had been solely in his name to his wife, Ginelle, and by doing so, Charles breached his contract with Umpqua Bank. At the same time, Umpqua Bank filed a lis pendens against the Nottingham Property that it alleged had been fraudulently conveyed.

In March 2021, shortly after Umpqua Bank filed its second complaint, this court issued its opinion in the appeal from the first action. See Gunzel, 16 Wn.App. 2d 795. Umpqua Bank informed Charles' counsel that, based on the opinion, it was not necessary for him to file an answer because the action may be dismissed. Charles' attorney again pointed out to Umpqua Bank's attorney that its allegations concerning title of the Nottingham Property were inaccurate, outlining its title history to demonstrate that the property was Ginelle's separate property.

In September 2021, because Umpqua Bank had not dismissed the action, Charles filed a motion for summary judgment. The following month, on October 8, the parties agreed to, and the superior court entered, a stipulated order for a voluntary dismissal, without prejudice, of Umpqua Bank's complaint.

Charles then filed a motion for recovery of costs and attorney fees on October 18. He argued he was entitled to attorney fees for claims arising from the breach of contract claim because Oregon law applied to claims arising out of the contract and he was the prevailing party under Oregon law. He also argued he was entitled to fees related to the claim for fraudulent transfer and the associated lis pendens under RCW 4.28.328 because Umpqua Bank was not substantially justified in filing the lis pendens.

In response, Umpqua Bank maintained that Oregon law did not apply to the breach of contract claim and there was no entitlement to fees under RCW 4.28.328 because Charles was not the prevailing party and Umpqua Bank was substantially justified in filing the lis pendens.

The superior court held a hearing on Charles's motion. Counsel for Umpqua Bank did not attend the hearing. The superior court granted Charles' request for attorney fees, finding he was entitled to fees for the breach of contract claim as the prevailing party under Oregon law and he was entitled to fees for the fraudulent conveyance and lis pendens, as Umpqua Bank was not substantially justified in recording the lis pendens.

Umpqua Bank appeals.

ANALYSIS

1. Attorney Fees for Breach of Contract Claim

The first question we address is whether the superior court erred in applying Oregon law to Charles's request for attorney fees as the prevailing party in Umpqua Bank's claim for breach of contract. Umpqua Bank maintains that the trial court should have applied Washington law and contends that under Washington law, Charles was not the prevailing party and therefore was not entitled to attorney fees. We disagree.

Choice of law is a question of law this court reviews de novo. Shanghai Commercial Bank Ltd. v. Kung Da Chang, 189 Wn.2d 474, 479, 404 P.3d 62 (2017). Resolving a choice of law dispute such as this one, where a contract contains a provision designating the parties' choice of law, requires this court to determine (1) whether an actual conflict of law exists, and if so, (2) whether the choice of law provision in the contract is effective. Erwin v. Cotter Health Ctrs., 161 Wn.2d 676, 692, 167 P.3d 1112 (2007).

"'When parties dispute choice of law, there must be an actual conflict between the laws or interests of Washington and the laws or interests of another state before Washington courts will engage in a conflict of laws analysis.'" Id. (quoting Seizer v. Sessions, 132 Wn.2d 642, 648, 940 P.2d 261 (1997)). Where the result of an issue is different depending on which state's law is applied, there is an actual conflict. Id.

The contract at issue contains a provision that awards Umpqua Bank costs and attorney fees incurred in connection with enforcement of the contract. Under Oregon law, a unilateral provision such as this is interpreted to provide bilateral enforcement, meaning that attorney fees and costs will be awarded to "the party that prevails on the claim," whether that be Umpqua Bank or Charles Gunzel. Oregon Revised Statute (ORS) 20.096.

Additionally, Oregon law defines a dismissed party as a prevailing party absent "circumstances [that] support[ ] a finding to the contrary." Goodsell v. Eagle-Air Estates Homeowner Ass'n, 280 Or.App. 593, 604, 383 P.3d 365 (2016). Notably, in Oregon, the question of attorney fees is a question of substantive law. Seattle-First Nat'l Bank v. Schriber, 51 Or.App. 441, 447-48, 625 P.2d 1370 (1981). Attorney fees awarded pursuant to ORS 20.096 "are not merely costs incidental to judicial administration, awarding them is a matter of substantive, rather than procedural, right." Schriber, 51 Or.App. at 448. Because Charles was a dismissed party here, he would be entitled to attorney fees under Oregon law.

Similarly, under Washington law, the provision providing for an award of attorney fees is interpreted to provide attorney fees and costs to "the prevailing party, whether he or she is the party specified in the contract . . . or not." RCW 4.84.330. However, this statute defines "prevailing party" as "the party in whose favor final judgment is rendered." RCW 4.84.330 (emphasis added). And the Washington Supreme Court has clearly stated that a voluntary dismissal is not a final judgment under this statute. Wachovia SBA Lending, Inc. v. Kraft, 165 Wn.2d 481, 492, 200 P.3d 683 (2009). Because the parties entered into a voluntary dismissal here, Charles would not be entitled to attorney fees under Washington law.

Because the outcome differs depending on whether Oregon or Washington law applies, there is an actual conflict. Because there is an actual conflict, we examine whether the contract provision is effective.

Where parties have included a choice of law provision in their contract, a determination of whether the provision is effective is governed by section 187 of the Restatement (Second) of...