FILED 

### COURT OF APPEALS 

### IN THE COURT OF APPEALS OF THE STATE OF1WMSWaGTON DIVISION II SCOTT B. OSBORNE, as Personal Representative ofthe ESTATE OF BARBARA MESDAG, Respondent,

V. THE DEPARTMENT OF REVENUE OF THE STATE OF WASHINGTON, 2015 

### AUG 1 1 

### Ali 9: 0 STATE OF WASHINGTON No. 4476 - II BY DEP TY

UNPUBLISHED OPINION

MELNICK, J. — The Department of Revenue (Department) appealed a superior court order 

### requiring it to issue a refund of principal estate tax overpayment and interest to the Estate of Barbara Mesdag ( Estate). That order relied on our Supreme Court' s opinion in In re Estate of Bracken, 175 Wn.2d 549, 290 P. 3d 99 ( 2012). In response to Bracken, in 2013, the legislature amended the Estate and Transfer Tax Act, chapter 83. 100 RCW, and made the change retroactive to the estates of decedents, like Mesdag, who died on or after May 17, 2005.. Challenges to the 

### amendmentwere considered bythe Supreme Court in In re Estate of. Hambleton, 181 Wn.2d 802, 809, 335 P. 3d 398 ( 2014), petitionfor cert.filed,No. 1471436 ( U.S. June 5, 2015). We stayed this appeal pending the Hambleton,decision, which issued on October 2, 2014. The Supreme Court 

### upheld the validity ofthe 2013 amendment. Hambleton, 181 Wn.2d at 836. The Department argues that the Hambleton opinion resolves this appeal in its favor and 

### thatthe superior court's order should be reversed. The Estate argues thatthe Hambleton decision 

## does not apply to this case because the Estate had a finaljudgment for which no lawful basis to appeal existed and because it had a vested right to its refund. In addition, the Estate argues that

even if it owes the disputed principal tax, the additional tax was not due until the legislature44766 - 5 -II amended the law effective June 14, 2013; therefore, we should orderthe Department to . refund the 

### interest the Estate paid under protest,to pay interest on the interest paid under protest, and to pay interest on the principal tax paid under protest from the payment date until the amendment. We hold that the 2013 amendment applies.to the Estate because the Department' s appeal 

### ofthe superior court' s order was pending at the,time the amendment became effective and the Estate did not have a vested right to its refund that would have been impaired by the retroactive provisions of the.amended statute. Further, Washington' s Administrative Procedure Act (APA)' requires us to remand to the Department for determination of the interest issues. We reverse the superior court's order in the Estate' s favor. We remand this case to the superior court with instructions for it to enter ajudgment in the Department' s favor on the principal tax issue and then remand the case to the Department for determination ofthe additional issues. FACTS 

### Barbara Mesdag died on July4, 2007. On October 6, 2008, her Estate filed its Washington Estate and Transfer Tax Return, which included a deduction for qualified terminable interest 

### property (QTIP)2 included inthe Estate's federal taxable estate. The Department disallowed the Estate' s QTIP deduction and issued a deficiency notice for additional taxes owed on the value of the QTIP property. 

### On February 26, 2010, the Estate paid the additional tax plus interest under

Ch. 34.05 RCW. 

### 2 A QTIP trust is atestamentarytrustthatallows adeceased spouseto controlthe final disposition ofthe trust property, while giving the surviving spouse a life estate in the income or use ofthe 

### trustproperty. Hambleton, 181 Wn.2d at809, 811. Thebenefitof. QTIPtrusts isthattrustproperty is not taxed when the first spouse dies; trust property is taxed only when the second spouse dies and the remainder beneficiaries become present interest holders. Hambleton, 181 Wn.2d at 809, 811. 244766 - 5 -II

protest. The Estate then applied for a tax refund. The Department denied the Estate' s refund request with respect to the QTIP property. The Estate petitioned the superior court forjudicial review ofthe Department' s denial of its refund. The parties jointly moved for a stay until the Supreme Court resolved Bracken. The court granted the motion. On October 18, 2012, Bracken issued and the court ruled in favor ofthe taxpayers. 175 Wn.2d at 575- 76. 

### On February 15, 2013, the Estate moved forjudgment on the pleadings, and argued that Bracken resolved all issues in its favor. Three days later, legislation

was introduced that amended the definitions of " transfer" and " Washington taxable estate" to expressly include QTIP property in the Washington taxable estate of a decedent. See LAWS of 2013, 2d Spec. Sess., ch. 2, § 2. The legislation contained an express retroactivity clause that 

### applied the amendment to estates ofdecedents, who died on or after May 17, 2005. See LAWS of 2013, 2d Spec. Sess., ch. 1, § 1. The Department opposed the Estate' s motion for judgment on the pleadings and argued 

### thatthe superior court should continueto staythe action sothe legislature could considerthe fiscal impact of Bracken, and because our Supreme.Court should overrule Bracken. The superior court 

### refusedto staythe action and grantedthe Estate's motion,orderingthe Departmentto immediately refund the Estate' s principal overpayment ofestate tax and interest.

On April 19, 2013, the Department appealed the superior court' s order. The Estate immediately moved to dismiss the appeal under RAP 18. 9( c), alleging that the appeal was frivolous and filed solely for the purpose of 

### delay. 

### On May 29, our commissioner denied the motion, and ruled that this court could not determine whetherthe appeal is " solely forthe purpose
of delay" without being able to review the Department' s brief. Commissioner' s May 29, 2013 

### ruling. We subsequently denied the Estate's motionto modifythe commissioner' s ruling. When

344766 - 5 - II 

### we ruled on the Estate' s motion to modify,the pending legislation had been signed into law. On June 14, 2013, the amendment took effect. LAWS of 2013, 2d Spec. Sess., ch. 2, § 14. Our Supreme Court considered challenges to the amendment in Hambleton, 181 Wn.2d 809. We stayed this case pending the Court' s ruling in Hambleton. Hambleton upheld the
retroactive application of the 2013 amendment. 181 Wn.2d at 836- 37. 

### We lifted the-stay and 

### ordered the parties to file additional briefing on the applicability ofthe Hambleton decision. The Department argues that the Hambleton opinion resolves this appeal in its favor. The Estate 

### disagrees and argues that the Hambleton decision does not apply to this case because the Department had no lawful basis to appeal the superior court' s order and the Estate had a " vested right" to a refund. ANALYSIS 

### The Estate argues thatthe2013 amendment to the Estate and Transfer Tax Act should not 

## applytothis case becausethe Estatehadafinaljudgmentnot subjectto appeal underexisting law. The Estate also argues that because its right to a refund had vested, retroactive application ofthe 2013 amendment would violate due process. We disagree. In addition, the Estate argues that even ifthe amendment applies, the Estate did not owe the disputed tax until the amendment became law. Therefore, the Estate urges us to order the Department to refund the interest the Estate paid prior to the change in the law, and to order the 

### Department to pay interest on the collected interest and interest on the principal tax collected before it was due. 

### The APA requires us to remand the interest issues to the agency for determination.

M44766 - 5 -II
I. STANDARD OF REVIEW The superior court granted the Estate' s motion forjudgment on the pleadings. In reviewing such an order, we examine the pleadings " to determine whether the claimant can prove any set of facts, consistent with the complaint, that would entitle the claimant to relief." 

### Parrilla v. King County, 138 Wn.App. 427, 431, 157 P.3d 879 (2007). Here, the Department notes that the motion 

### should have been treated as one for summary judgment because the parties presented matters
outside the pleadings to the superior court, e. g., the pending legislation. 

### Summaryjudgment is appropriate where, viewing the evidence in the light mostfavorable to the nonmoving party,there 

### is no genuine issue ofmaterial fact and the moving party is entitledtojudgment as amatteroflaw. Loeffelholz v. Univ. of Wash., 175 Wn.2d 264, 271, 285 P. 3d 854 (2012). Here, the superior court' s decision to grantjudgment on the pleading rather than summary judgment does not affect the outcome of this appeal. In a tax case, we review a superior court' s legal conclusions de novo. Bracken, 175 Wn.2d at 562; Home Depot USA, Inc. v. Dept of 

### Revenue, 151 Wn.App. 909, 916, 215 P.3d 222 (2009). II. APPLICABILITY OF 2013 AMENDMENT

A. Final Judgment The Estate argues that the retroactive amendment is inapplicable because the superior 

### court'sjudgmentordering a refund was final. The Estate's argument is predicated on its allegation that it had ajudgment for the refund amount that should have been final but forthe Department' s 

### frivolous appeal filed solely forthe purpose ofdelay.

Hambleton rejected a similar argument. 181 Wn.2d at 835- 36. The Hambleton Estate 

### argued thatthe superior court's ruling was final atthe time the legislature enacted the legislation,
and therefore, the amendment should not apply to it. Hambleton, 181 Wn.2d at 835. The

E44766 - 5 -II 

### Hambleton Estate arrived atthis conclusion by arguing that the Department had no basis in lawto 

### appeal the order granting summaryjudgment because the Department appealed the order before the amendment was enacted. Hambleton, 181 Wn.2d at 835- 36. The Supreme Court found the Hambleton Estate' s reasoning unpersuasive:

Generally, "[ w]hen a new law makes clear that it is retroactive, an appellate 

### court must applythat law in reviewingjudgments still on appeal thatwere rendered before the law was enacted, and must alter the outcome accordingly." [ Plaut v. Spendthrift Farm, Inc., 514 U.S. 211, 226, 115 S. Ct. 1447, 131 L. Ed. 2d 328 1995)]. Therefore, despite the existence of a " final" trial court ruling, retroactive amendments may apply to cases pending on appeal.

A party may appeal final trial court judgments. RAP 2.2( a)( 1). However, parties may not frivolously appeal or appeal simply for purposes of 

### delay. RAP 

### 18.9(c). Appellate courts will,on motion from the opposing party, dismiss frivolous appeals and appeals brought for purposes ofdelay. RAP 18.9(c). Here, the trial court entered its order granting summaryjudgment on April 19, 2013 and [the Department] filed anotice ofappeal on May 16, 2013. The estate ofHambleton did not move under RAP 18.9(c) to dismiss the appeal, and the appeal 

### was still pending whenthe legislature enactedthe2013 amendment. Therefore,the retroactive amendment applies to the case. Hambleton, 181 Wn.2d at 836. Here, the Estate acknowledges that the Supreme Court rejected a similar argument in 

### Hambleton, but it argues that this case is distinguishable on its facts from Hambleton. Unlike in Hambleton, here the Estate moved to dismiss the Department' s appeal under RAP 18. 9( c). The 

### Estate argued that the appeal was frivolous and filed solely for the purpose of delay. Our commissioner denied the Estate' s motion to dismiss. The Estate moved to modify the 

### commissioner' s ruling, butwe denied that motion. The Estate argues that byfiling the motion to dismiss, it " 

### satisfied its necessary procedural predicate to being able to now argue [ that the Department] had no legitimate basis for its appeal when itwasfiled, rendering the refundjudgment

044766 - 5 - II
in the Estate' s favorfinal and not subject to [the retroactive amendment]." 

### Supp. Br. ofResp't at 11. RAP 18. 9( c) provides that we " will, on motion of a party, dismiss review of a case ... if the application for review is frivolous, moot, or solely for the purpose of delay." An appeal is 

### frivolous if,considering the entire record, it presents no debatable issues upon which reasonable minds might differ and it is so devoid of merit that there is no reasonable possibility of reversal. 

### In re Guardianship ofWells, 150 Wn.App. 491, 504, 208 P.3d 1126 (2009). The Estate arguesthatthe Department' s appeal was solelyforthe purpose ofdelaybecause 

### its only aim was to prevent thejudgment from becoming final before the legislature enacted the amendment. The Department argues that its appeal was not frivolous because it had a good - faith 

### beliefthat Bracken was wrongly decided and should be overruled bythe Supreme Court andthat the legislature would amend the controlling law based on pending legislation. We agree with the Department that its appeal was not frivolous when filed because the Department made a good - faith argument for overruling Bracken. The Department argued that Bracken should be overruled at every opportunity. It also noted that it may request a transfer to the Supreme Court under RAP 4.4. Furthermore, the Department anticipated "that the controlling 

### law may be retroactively amended by the Washington Legislature during the 2013 legislative
session." 

### Department's Opposition to Motion to Dismiss (filed May 13, 2013) at 4. As noted in its response to the motion to dismiss, legislation had already been introduced. Under these 

### circumstances, we conclude that the Department' s appeal was not frivolous or filed solely forthe purposes ofdelay. The Estate urges us to hold that thejudgment in this case should be deemed final as ofthe date the superior court ordered the refund. 

### But the Estate does not cite persuasive authority for

744766 - 5 -II
this proposition3 and we decline its invitation. "` Where no authorities are cited in support of a proposition, the court is not required to search out authorities, but may assume that counsel, after diligent search, has found none."' 

### State v. Logan, 102 Wn.App. . 907, 911 n. 1, 10 P.3d 504 (2000) quoting DeHeer v, Seattle Post— Intelligencer, 60 Wn.2d 122, 126,- 372 P. 2d 193 ( 1962)). We
cannot ignore the fact that because of the appeal, the judgment was not final. Accordingly, we reject the Estate' s final judgment argument.

B. Due ProcessNested Right 

### The Estate argues that applying the retroactive amendment violates due process by depriving the Estate ofits vested rightto a refund. We disagree. A party alleging a due process violation must first establish a legitimate claim of
entitlement to the life, liberty, or property at issue. Willoughby v. Dep' t ofLabor & Indust., 147 Wn.2d 725, 732, 57 P. 3d 611 ( 2002). "` 

### A statute may not be applied retroactively to infringe a
vested right."' 

### Hambleton, 181 Wn.2d at 828 (quoting In re Pers. Restraint ofCarrier, 173 Wn.2d 791, 810, 272 P. 3d 209 (2012)). This notion finds root in the due process clauses of the Fifth and Fourteenth 

### Amendments. While due process generally does not prevent new laws from going into effect, it does prohibit changes tothe lawthat retroactively affect rights which vested under the prior law....

3 The Estate relies on Hambleton, but Hambleton does not support it. The Estate relies entirely on 

### the Supreme Court having mentioned thatthe Hambleton Estate did not file a motion to dismiss the appeal. See Hambleton, 181 Wn.2d at 836. The Supreme Court referred to RAP 18.9(c) to 

### explainthatamechanism exists for litigants to seekdismissal offrivolous appeals. The Hambleton 

### Estate did nottake advantage ofit,and thus, the appeal was still pending. Hambleton, 181 Wn.2d at 836. Here,the Estate used RAP 18.9(c), but itwas notsuccessful in havingthe appeal dismissed; thus, the appeal was still pending. The dispositive fact in Hambleton was thatthe appeal was still 

### pending whenthe legislature amendedthe statute. And the same is true here. 344766 - 5 -II A] vested right, entitled to protection from legislation, must be 

### something more than a mere expectation based upon an anticipated continuance ofthe existing law; it must have become atitle, legal or equitable, to the present orfuture enjoyment ofproperty, a demand, or a legal exemption from a demand by another." Hambleton, 181 Wn.2d at 828-29 ( second alteration in original) (

### quoting Carrier, 173 Wn.2d at 811 ( quoting 

### Godfrey v. State, 84 Wn.2d 959, 963, 530 P.2d 630 ( 1975))). It is undisputed that 

### underthe amended tax statutes, the QTIP property at issue must be included in the Estate' staxable
estate. See RCW 83. 100.020( 14), ( 15); Hambleton, 181 Wn.2d at 809. Therefore the Department does not owe the Estate a refund for taxes it paid on the QTIP property. We reverse the superior 

### court's order and remand to the superior court for entry ofjudgment in the Department' s favor on the principal tax issue. III. INTEREST ISSUES The Estate argues that even if it is not entitled to a refund ofany ofthe principal estate tax 

### paid under protest, the tax attributable to the QTIP property was not due until the legislature
amended the law on June 14, 2013. Therefore, the Estate urges us to order the Department to 

### refundthe interestpaid underprotestbythe Estate,topay interestonthe interestpaid underprotest, 

### and to pay interest onthe principal taxpaid underprotest fromthe payment dateuntil the effective date of the amendment. The Department argues that we should not address these interest issues because they were not raised before the agency. We conclude that the Estate is entitled to raise these new interest issues, but it must first present its arguments and requests for interest to the Department for its consideration. 

### Generally, undertheAPA,issues notraised beforethe agency may notbe raised on appeal. RCW 34. 05. 554. However, a party may raise a new issue on appeal if "[ t]he interest ofjustice
would be served 

### by resolution of an issue arising from ... [ 

### a] change in controlling law occurring
044766 - 5 -II

after the agency action." RCW 34.05. 554( 1)( d)( i). Under those circumstances, "[ t]he court shall
remand to the agency for determination." RCW 34.05. 554(2). Here, the interest issues raised in the Estate' s supplemental briefwere not presented to the 

### Department .

4 Butjustice would be served by resolving the interest issues, which arose from a retroactive change in law afterthe Department denied the Estate' s refund request. Therefore, once the superior court entersjudgment in favor ofthe Department on the principal tax issue,we instruct 

### the superior court to remand this case to the Department for determination ofthe interest issues
l raised in the Estate' s supplemental brief. IV. ATTORNEY FEES 

### The Estate requests reasonable attorneyfees and costs under RAP 18.9 and RCW 4.84. 185 

### for defending afrivolous appeal. An action is frivolous if,considering the action in its entirety, it
cannot be supported 

### by any rational argument based in fact or law. Dave Johnson Ins., Inc. v. Wright, 167 Wn.App. 758, 785, 275 P. 3d 339 (2012). The Department successfully appealed the 

### superior court' s judgment ordering it to refund taxes paid on the Estate's QTIP property. Therefore,this action was not frivolous, andwe denythe Estate' s attorney fee request. We reverse the superior court's order in the Estate' s favor, and remand to the superior court with instructions for itto enter ajudgment in the Department' s favor on the principal tax issue and then remand.the case to the Department for determination ofthe additional issues.



### 4 The Estate requested that the Department refund the tax and interest paid and that it pay interest 

### on those amounts, based on its argument that . the principal tax was not owed and would be refunded. The Estate now requests the Department ( 1) refund the interest paid, (2) pay interest on 

### the interest paid, and (3) pay interestonthe principal taxpaid despite thattheprincipal tax is owed and will not be refunded. 

### Because ofthe fundamentally different underlying bases for relief,the interest issues the Estate raised on appeal constitute new issues that it must present to the Department. 1044766 - 5 -II. 

### A majority of the panel having determined that this opinion will not be printed in the Washington Appellate Reports, butwill be.filed for public record in accordance with RCW 2.06.040, it is so ordered.

We concur: 

# 0Worswicic,J.

Johanson, C.J.

11 

# 7 Melnick,J.