Case Title: State v. ANW Seed Corporation

Citation: 116 Wash. 2d 39, 802 P.2d 1353

Docket Number: 56956-8

State: washington

Court: Washington Supreme Court

Date: 1991-01-10T00:00:00Z

Document:
116 Wn.2d 39 (1991) 802 P.2d 1353 THE STATE OF WASHINGTON, Petitioner, v. A.N.W. SEED CORPORATION, ET AL, Respondents. No. 56956-8. The Supreme Court of Washington, En Banc. January 10, 1991. *41 Kenneth O. Eikenberry, Attorney General, Owen F. Clarke, Jr., Senior Assistant, and Michael E. Grant, Assistant, for petitioner. Kargianis, Austin & Erickson, by Russell A. Austin, Jr., and Jeffery M. Campiche, for respondents. BRACHTENBACH, J. Three issues are presented: 1. When a plaintiff executes on an unsuperseded judgment which is later reversed on appeal, what is the measure of restitution to be made by the judgment creditor proceeds of the sheriff's sale or fair market value of the property sold? 2. Under the Consumer Protection Act, RCW 19.86, where the trial court found no intent to deceive and the *42 consumers who testified were not deceived, was it error for the court to find the defendant's conduct had a tendency to mislead or deceive? 3. In reviewing a trial court's determination of who is a prevailing party, what is the proper standard of review? This litigation began with an action brought by the State against defendant, A.N.W. Seed Corporation, alleging violation of RCW 19.86, the Consumer Protection Act (CPA) based on defendants' alleged misrepresentations with regard to the growing and marketing of Jerusalem artichokes. Defendants appeared, but counsel withdrew and a default judgment was granted. Denial of defendants' motion to vacate was followed by an appeal. Defendants did not post a supersedeas bond. Three months after notice of appeal, the State, the judgment creditor, obtained a writ of execution. The sheriff seized and ultimately sold farm machinery, vehicles, and other personal property of defendants. The sales proceeds were $16,588.50. The sales were conducted in accordance with the statute. About 6 months later the Court of Appeals vacated the default judgment. State v. A.N.W. Seed Corp., 44 Wn. App. 604, 722 P.2d 815 (1986) (A.N.W. Seed I). Defendants moved, pursuant to RAP 12.8, for an order of restitution to restore the property sold at execution, or, in the alternative, to restore the reasonable market value of the property and to reimburse defendants for lost income resulting from the seizure and sales. (Clerk's Papers of Respondents, at 241-43). The trial court entered an order of restitution for the fair market value of the property. (Clerk's Papers of Appellant, at 8-9). After a hearing, the court set the value at $57,631.50. After trial on the merits the court entered the following relevant finding of fact: Finding of fact 3. Clerk's Papers of Appellant, at 5. That finding led to these conclusions of law: Conclusions of law 2, 3. Clerk's Papers of Appellant, at 5-6. The court held that the State was the prevailing party, but exercised its discretion under RCW 19.86.080 and denied an award of attorney fees. The State appealed the trial court's holding that restitution was to be fair market value of the seized property rather than the proceeds of the sheriff's sales. Defendants cross-appealed the denial of lost profits, the court's determination of value of the seized property, and the finding that defendants' conduct violated the CPA. The Court of Appeals affirmed the fair market value measure of restitution, reversed the finding of a CPA violation, reversed the determination that the State was the prevailing party, and remanded for a discretionary determination of whether defendants were entitled to attorney fees. State v. A.N.W. Seed Corp., 56 Wn. App. 763, 785 P.2d 838 (1990) (A.N.W. Seed II). The State's petition for review raises the issues identified above. Defendants did not raise any additional issues in their answer. RAP 13.4(d). We reverse the Court of Appeals. The first issue: When a plaintiff executes on an unsuperseded judgment which is later reversed on appeal, what is the measure of restitution to be made by the judgment *44 creditor proceeds of the sheriff's sale or fair market value of the property sold? We start with the proposition that a trial court judgment is presumed valid and, unless superseded, the judgment creditor has specific authority to execute on that judgment. RAP 7.2(c). RAP 8.1 provides for supersedeas in the trial court. Upon good cause shown, the court may fix an amount different from the amount of the judgment. RAP 8.1(b)(1). As noted in the comments to RAP 8.1, the relief afforded by RAP 8.1 is available as a matter of right. 86 Wn.2d 1176 (1976). These defendants did not supersede the judgment against them. When the unsuperseded judgment is reversed, after execution thereon, the judgment debtors' recourse is provided by RAP 12.8. It provides in relevant part: RAP 12.8. Because of the sales of the property it could not be restored; restoration of its value is the remedy. [1] Defendants argue that the word "value" in RAP 12.8 can only mean market value, citing cases for that general definition of "value." They convinced the trial court and the Court of Appeals, but we do not agree. After considering the historical perspective of restitution in these circumstances, the majority views as reflected in the Restatement of Restitution, and policy reasons, we conclude that the judgment debtor is entitled to the proceeds of execution, not the fair market value. Additionally, examination of the authorities cited by defendants and those relied upon by the Court of Appeals do not support the fair market value theory. RAP 12.8, like its statutory predecessor, RCW 4.88.240 (repealed by Laws of 1957, ch. 7, § 10, p. 27), provides a form of restitution. RCW 4.88.240 authorized a writ of restitution "for the purpose of restoring to the appellant his *45 property, or the value thereof." Laws of 1893, ch. 61, § 27, p. 132. Restitution, the remedy sought by defendants, encompasses a very broad scope of remedies fashioned to fit a variety of circumstances. The restitution here sought is but a narrow application of the underlying principle that one person may be "accountable to another on the ground that otherwise he would unjustly benefit or the other would unjustly suffer loss." Restatement of Restitution, at 1 (1937). [2-4] In construing a court rule, as in construing a statute, the court must examine the purpose, the historical background, and when it codifies a principle of common law, ascertain the generally accepted common law. Indeed, the common law, with stated exceptions not applicable here, is the rule of decision in Washington. RCW 4.04.010. If a statute is in derogation of a common law principle, it is to be construed strictly. If a statute substantially alters a common law principle, the intent to do so must be apparent from an express declaration, legislative history or the words themselves. McNeal v. Allen, 95 Wn.2d 265, 269, 621 P.2d 1285 (1980). Those principles apply to interpretation of a court rule. State v. McIntyre, 92 Wn.2d 620, 622, 600 P.2d 1009 (1979). What is the common law principle of restitution applicable to these facts? We turn to the Restatement of Restitution. The object of the Restatement Restatement of Restitution, at ix (1937). The Restatement of Restitution expresses the general common law applicable to the exact facts of this case. Section 74, entitled "Judgments Subsequently Reversed", provides: Restatement of Restitution § 74 (1937). That section declares the general principle, but 15 comments with 32 illustrations follow, demonstrating that generalized statements extracted from opinions do not reflect the particularized standard which governs specific facts. Comment d reads in part as follows: Restatement of Restitution § 74 comment d (1937). Illustration 12 is identical to the facts of this case: Restatement of Restitution § 74 comment d, illustration 12 (1937). There is supporting rationale elsewhere in the Restatement. In treating unjust enrichment, it is explained: Restatement of Restitution § 1 comment e (1937). Likewise in summarizing the measure of recovery, it is said: (Italics ours.) Restatement of Restitution § 149, at 596 (1937). Thus the Restatement explicitly establishes that the common law measure of restitution, under these facts, is the proceeds from the sheriff's execution sales, not the market value of the property sold, together with interest from the date of seizure. We so hold because the meaning and intent of the word "value" in RAP 12.8 reflects a word of art; our interpretation is logically consistent with the principles and rationale of common law restitution. Text authority also supports our holding. "[T]he general and better opinion" is that "the judgment defendant is only entitled to so much as the plaintiff has realized upon the execution." 2 J. Sutherland, Damages § 469, at 1544 (4th ed. 1916); accord, 2 R.C.L. Appeal and Error § 254, at 299 (1914). There are compelling principles of policy which warrant our holding. RAP 7.2(c) permits a judgment creditor to execute on a judgment. The court rule decrees also that "[a]ny person may take action premised on the validity of a trial court judgment or decision until enforcement of the judgment or decision is stayed as provided in rules 8.1 or 8.3." RAP 7.2(c). This authority to act upon a presumptively valid judgment would be essentially negated if the judgment creditor risked liability for the uncertain and perhaps then unascertainable market value of the property *48 executed upon. Even though the creditor and the sheriff acted in good faith and complied with statutory requirements there would be a very real exposure for a value far exceeding that realized upon a proper sale. In this case the judgment creditor, under the holding of the trial court and the Court of Appeals, became liable for 3 1/2 times the amount realized at execution sales which are unchallenged as being procedurally proper. Indeed, defendants sought 6 to 8 times the amount realized, plus the value of real property alleged lost because of the farm machinery being sold, plus loss of income for a period of years. The risk of such a great exposure renders meaningless the rights granted a judgment creditor under RAP 7.2(c). Equally important is RAP 8.1(a) which "provides a means of delaying the enforcement of a trial court decision in a civil case", i.e., by supersedeas. RAP 8.1(b). If defendants' theory prevails, the judgment debtor need not post a supersedeas bond or other security. The debtor would know that he would get the most favorable of either the sale proceeds or market value plus interest. In effect the notice of appeal would be a substitute for supersedeas. That is not the purpose or intent of RAP 7.2(c) and RAP 8.1. The Court of Appeals, without explanation, found Restatement of Restitution § 74 comment d, illustration 12, which we find directly on point, to not be applicable. Lacking such explanation, we examine the cases relied upon by the Court of Appeals to support its holding. In re 1969 Chevrolet, 2-Door, 134 Ariz. 357, 656 P.2d 646 (Ct. App. 1982) is not in point. The court carefully drew the distinction that the seizure was unlawful in contrast to this case where the execution was authorized by court rule. Wade v. Rathbun, 23 Cal. App. 2d 758, 760, 67 P.2d 765 (1937) is a trial court opinion reviewing a claim of a $120 exemption in municipal court. Wade had no restitution issue at all, only interpretation of an exemption statute. The quote from Barron v. Phelps, 238 S.W.2d 1016, 1019 (Ky. 1951) is dicta regarding a mootness claim. DeMayo v. Lyons, 360 Mo. 512, 228 S.W.2d 691 (1950) does not support the holding of the *49 Court of Appeals. The court made two holdings. First, as to property sold at execution, the debtor was entitled to the sale proceeds, which the court noted was at least equal to market value. Second, as to property not sold at execution nor produced, the creditor was liable for market value. That is quite different from these facts. Indeed, Lancaster v. Simmons, 621 S.W.2d 935, 941 (Mo. Ct. App. 1981), the same jurisdiction, states that DeMayo held that restitution should be of the amount received upon execution. The quotation from Lytle v. Payette-Oregon Slope Irrig. Dist., 175 Or. 276, 286, 152 P.2d 934, 156 A.L.R. 894 (1944) is incomplete. The case involved a judgment creditor who kept possession of the property, the action was not for market value, but compensation for use of the property and waste, a totally different restitution issue than here present. However, in addition to the dicta quoted by the Court of Appeals, the court commented: "[I]t is said that restitution is usually limited to what has actually been received and retained by the creditor for his own benefit." Lytle, 175 Or. at 287. Hess v. Cedar Rapids State Bank, 191 Iowa 685, 182 N.W. 813 (1921) does support the holding of the Court of Appeals. The court noted a divergence in opinion, rejected the textbook conclusion that the "proceeds only" doctrine was the better reasoned result, and cited only one case in support of its conclusion. The second issue arises from the trial court's finding that "the overall promotional and sales program carried out by Defendants ... did have a tendency to mislead or deceive." Finding of fact 3; Clerk's Papers of Appellant, at 5. The Court of Appeals reversed this finding. The Court of Appeals did not find that the finding of fact was not supported by substantial evidence, but rather stated: "Under these facts, we find the court's order [finding?] incongruent." State v. A.N.W. Seed Corp., 56 Wn. App. 763, 772, 785 P.2d 838 (1990) (A.N.W. Seed II). The trial court had found that defendants did not intend to deceive nor were the farmers with whom defendants contracted deceived. *50 [5] The Court of Appeals acknowledged the established principles that intent to deceive and proof of a specific party being deceived were not necessary predicates to a CPA violation. A.N.W. Seed II, at 771. Apparently, the Court of Appeals concluded that there would be no future deception, therefore it held the finding was in error. The Court of Appeals asserted that defendants had been "effectively put out of business by the commencement of this action". A.N.W. Seed II, at 772. There is no finding of fact to that effect. [6] Even assuming that the defendants were effectively out of business, that fact is irrelevant. Cessation of the offending business may be relevant regarding an injunction against future activities. State v. Ralph Williams' North West Chrysler Plymouth, Inc., 87 Wn.2d 298, 553 P.2d 423 (1976), appeal dismissed, 430 U.S. 952, 51 L. Ed. 2d 801, 97 S. Ct. 1594 (1977). However, that is a separate issue from finding a violation has occurred already. That is what the trial court found and held, i.e., a violation of the CPA had occurred, not that it was likely to occur in the future. The trial court did not issue an injunction, so the premise of no future violations upon which the Court of Appeals focused is not valid. Finally, the third issue. Having concluded that the trial court erred in finding factually and holding legally that there was a violation of the CPA, the Court of Appeals concluded that the trial court necessarily erred in holding the State to be the prevailing party. This was error. The statute, RCW 19.86.080, vests discretion in the trial court to determine whether to award attorney fees to the prevailing party. [7] Apparently, the Court of Appeals reversed, as a matter of law, the trial court's exercise of discretion, but it did not address the standard which it employed as a basis for reversal. We hold that the statute vests discretion in the trial court to determine who is the prevailing party as part of its statutory discretion whether to award attorney fees to *51 that prevailing party. We have so held under similar statutes. Progressive Animal Welfare Soc'y v. UW, 114 Wn.2d 677, 683, 790 P.2d 604 (1990); Blair v. WSU, 108 Wn.2d 558, 572, 740 P.2d 1379 (1987). That finding by the trial court will be reversed only for an abuse of discretion. Winans v. W.A.S., Inc., 112 Wn.2d 529, 772 P.2d 1001 (1989). Because we have reinstated the trial court's finding of a violation of the CPA, there is no reason to disturb its holding that the State was the prevailing party. The State does not challenge denial of an award of attorney fees to it. In summary, (1) the trial court and the Court of Appeals are reversed as to their holdings that the judgment debtor is entitled to market value of the property sold by execution of the unsuperseded judgment; (2) the Court of Appeals is reversed as to its holding that there was no violation of RCW 19.86; and (3) the Court of Appeals is reversed as to its reversal of the trial court's determination of the prevailing party. CALLOW, C.J., and DOLLIVER, DORE, ANDERSEN, DURHAM, SMITH, and GUY, JJ., concur.