Universal Life Church Monastery Storehouse v. R.L.K., LLC

UNIVERSAL LIFE CHURCH MONASTERY STOREHOUSE, a Washington corporation;and VISIONARY VENTURES, INC., a Washington corporation, Appellants, v. R.L.K., LLC, a Washington limited liability company; RODNEY KRAFKA, an individual residing in the state ofWashington, and FEREYDOON ABOOSAIDI, an individual residing in the state of Washington, Respondents.

No. 80505-3-I

COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION ONE

April 26, 2021

UNPUBLISHED OPINION

VERELLEN, J. — Several Washington decisions make passing references to a possible award of attorney fees for bad faith prelitigation misconduct, but in application, that theory is narrow and circumscribed. Where the bad faith conduct involves a prelitigation disregard of judicial authority, then, akin to contempt, a court may impose attorney fees. Otherwise, the doctrine only applies to a short list of five causes of action which inherently involve a form of bad faith allowing an award of attorney fees as damages.

Here, Universal Life Church Monastery Storehouse prevailed at trial on the majority of its claims against Rodney Krafka, R.L.K., LLC, but Universal Life Church does not allege any prelitigation disregard of judicial authority, and none of the five causes of action were implicated. The trial court did not err in rejecting Universal Life Church's request for attorney fees for bad faith prelitigation misconduct. And Universal Life Church failed to establish a statutory or equitable indemnity basis for an award of attorney fees.

Therefore, we affirm.

FACTS

In 2013, Rodney Krafka leased a portion of a commercial building and one parking space behind the building from Fereydoon Aboosaidi. In 2016, Krafka transferred his 2013 lease to R.L.K., LLC.

In 2017, Universal Life Church leased the remainder of the building from Aboosaidi, including the mezzanine and the kitchen, together with the rest of the parking lot behind the building. Visionary Ventures Inc. (VVI), the owner of a neighboring business, entered into an agreement with ULC which permitted VVI to use ULC's leased space. George Freeman was the president of the board of ULC and the president of VVI.¹

ULC and R.L.K. had ongoing disputes largely because R.L.K. often parked on ULC's leased space.

In March 2017, R.L.K. sued Aboosaidi and Freeman for tortious interference with R.L.K.'s parking rights and business and civil conspiracy. ULC filed a motion to intervene, which the trial court denied.

On June 28, 2017, ULC commenced the present action against R.L.K. and Aboosaidi. ULC's initial complaint alleged claims for quiet title and ejectment, declaratory relief, injunctive relief, libel and slander, tortious interference, and fraud. The complaint did not assert any claim against Aboosaidi, but he was named as an additional party. In its prayer for relief, ULC requested "an award of attorney's fees and legal costs against R.L.K. and Krafka in an amount to be determined by the Court."²

On March 18, 2018, ULC filed an amended complaint adding claims for damages against R.L.K. for vandalism and trespass and against Aboosaidi for failing to take legal action against R.L.K. and violating ULC's covenant of quiet enjoyment. The prayer for relief maintained ULC's request for attorney fees.

In August 2019, after a five-day bench trial, the court ruled in favor of ULC as to most of its claims. ULC filed a motion for an award of attorney fees based upon RCW 4.24.630, equitable indemnity, and the court's inherent equitable powers "for prevailing on their claim of defamation against Krafka."³ On August 21, the trial court issued detailed findings of fact and conclusions of law but did notmake any findings or conclusions supporting a statutory or equitable claim for attorney fees.

The trial court awarded defamation damages to ULC for $75,000 and to VVI for $75,000; a permanent injunction against R.L.K. for trespassing; a declaratory judgment recognizing ULC's exclusive possession of ULC's leased premises; an order ejecting R.L.K. from ULC's leased premises and quieting title in ULC's favor; and $54,176 in damages against R.L.K. for trespass.⁴ The court dismissed Aboosaidi's claim for forfeiture and ejectment but awarded Aboosaidi attorney fees against R.L.K. based upon the fee provision in their lease agreement.⁵

The court denied ULC's request for attorney fees, finding that "[p]laintiffs did not adequately plead the basis of their claim for fees to put [d]efendants R.L.K. on notice, and [p]laintiffs are not entitled to fees under statute or in equity."⁶ The court dismissed "[a]ll other claims, counterclaims, and cross-claims" with prejudice.⁷

ULC appeals.

ANALYSIS

I. Bad Faith Prelitigation Misconduct

ULC contends it is entitled to attorney fees "for prevailing on [its] claim of defamation against [R.L.K.]" due to R.L.K.'s bad faith prelitigation misconduct.⁸

We review a claim for attorney fees under a theory of bad faith prelitigation misconduct de novo.⁹ We follow the American rule requiring a contract, statute, or equitable basis for an award of attorney fees.¹⁰

Bad faith can warrant a claim for attorney fees.¹¹ Several Washington cases mention the concept of attorney fees based upon bad faith prelitigation misconduct, but few courts have applied that doctrine and even then, only in narrow circumstances.¹² One way to establish bad faith is through prelitigation misconduct. "Pre-litigation misconduct refers to 'obdurate or obstinate conduct that necessitates legal action' to enforce a clearly valid claim or right."¹³

The court in Rogerson Hiller v. Port of Port Angeles clarified that "[t]he award of attorney's fees for prelitigation misconduct can be compared to a'remedial fine[ ] imposed by a court for civil contempt' in that the party acting in bad faith is wasting private and judicial resources."¹⁴ And consistent with this observation in Rogerson, the court in Greenbank Beach and Boat Club v. Bunney noted that "[i]n general, a court may resort to its inherent powers only to protect the judicial branch in the performance of its constitutional duties, when reasonably necessary for the efficient administration of justice."¹⁵ And in Greenbank, after observing that prelitigation misconduct refers to "obdurate or obstinate" conduct that necessitates legal action to enforce a clearly valid claim or right, the court stated:

Prelitigation misconduct may serve as the basis for an award of fees in the case of "enforcement of judicial authority, as where misconduct of a party amounting to contempt of court has caused the opposing party to incur counsel fees, or where a person retains possession of property after a judicial determination of the wrongful character of his possession, thus forcing the party wronged to the expense of further proceedings to recover possession or otherwise enforce his rights."¹⁶

The Greenbank court held, "Prelitigation misconduct, to be sanctionable by an order to pay the other party's attorney fees, necessarily involves some disregard of judicial authority."¹⁷ Here, ULC makes no argument that R.L.K. engaged in prelitigation misconduct in disregard of judicial authority.

The only other arguable category of bad faith prelitigation misconduct attorney fees are five causes of action that allow an award of attorney fees as damages. Those causes of action are limited to malicious prosecution, wrongful garnishment, wrongful attachment, actions to dissolve a wrongful temporary injunction, and slander of title.¹⁸

The court in Rorvig v. Douglas added slander of title to this short list, by focusing on the Restatement (Second) of Torts § 633.¹⁹

The Restatement provides:

(1) The pecuniary loss for which a publisher of injurious falsehood is the subject to liability is restricted to

(a) the pecuniary loss that results directly and immediately from the effect of the conduct of third persons, including impairment of vendibility or value caused by disparagement, and

(b) the expense of measures reasonably necessary to counteract the publication, including litigation to remove the doubt cast upon vendibility of value of disparagement.²⁰

Specifically, the court in Rorvig reasoned that slander of title is a type of the general tort of publication of an injurious falsehood, which is generally limited to disparagement of property.²¹ The court held that "[a]ttorney fees incurred inremoving the cloud from the title and restoring vendibility are necessary expenses of counteracting the effects of slander."²²

Here, none of the causes of action recognized in Rorvig apply. ULC only pleaded claims of quiet title and ejectment, declaratory relief, injunctive relief, libel and slander, tortious interference, and fraud.

First, ULC relies on R.L.K.'s defamatory statements as the bad faith prelitigation misconduct. But defamation is not one of the five causes of action recognized in Rorvig.

Second, at oral argument ULC emphasized fraud by R.L.K. It is especially troublesome that in 2016, R.L.K. forged a purported 2012 lease giving R.L.K. the right to occupy the mezzanine ultimately leased to ULC. But fraud is not one of the causes of action recognized as a form of bad faith prelitigation misconduct. And neither the findings of fact nor the limited record before us reveals any actionable use of the forged lease by R.L.K.

Even if we apply the reasoning from Rorvig and analyze ULC's claims under the Restatement (Second) of Torts § 623A's general principle of liability for publication of an injurious falsehood, none of ULC's causes of actions qualify as an injurious falsehood disparaging property.²³ And the trial court made no finding of publication as required by Restatement (Second) of Torts § 623A. None of thefive causes of action qualifying for an award of bad faith prelitigation misconduct fees applies here.

Third, at the core of ULC's arguments is the troublesome nature of R.L.K.'s many malicious and fraudulent acts. But the standard urged by ULC would necessarily require an award of attorney fees for any equitable claim based on fraud...