Court Opinion

ID: 2763990
Source: CourtListenerOpinion
Date Created: 2014-12-23 17:31:41.48862+00
Date Added: 2024-06-11T11:27:17.966400
License: Public Domain

FILED
                                                           DECEMBER 23, 2014
                                                         In the Office of the Clerk of Court
                                                       W A State Court of Appeals, Division III

           IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON 

                              DIVISION THREE 

SHARON SHEPARD,                              )
                                             )        No. 31740-4-1I1
                    Appellant,               )
                                             )
      v.                                     )
                                             )
DAVID HOLMES and LORRAINE                    )
HOLMES,                                      )
                                             )
                    Defendants,              )        UNPUBLISHED OPINION
                                             )
ERA SUN RIVER REALTY and                     )
CHICAGO TITLE INSURANCE                      )
COMPANY,                                     )
                                             )

                    Respondents.             )

      SIDDOWAY, C.J. -    Sharon Shepard appeals the trial court's summary judgment

dismissal of misrepresentation and related claims she asserted against ERA Sun River

Realty and Chicago Title Insurance Company, and its denial of her motion for leave to

amend her complaint to assert a contract claim against Sun River.

      The trial court properly concluded that her causes of action all accrued in

July 2007 and were time barred by the time she sued in December 2012. The denial of

Ms. Shepard's motion for leave to amend is affirmed on the basis that she had no viable
No. 31740-4-111
Shepard v. Holmes

breach of written contract claim against Sun River and amendment would have been

futile. We affirm the trial court in all respects and award attorney fees and costs on

appeal to Sun River.

                       FACTS AND PROCEDURAL BACKGROUND

       In July 2007, Sharon Shepard and her former husband entered into a real estate

contract to purchase a parcel ofland located in Benton County as an investment property.

The purchase and sale agreement described the property as "Lots 1,2, 3, & 4 Short Plat

#865." Clerk's Papers (CP) at 107. Ms. Shepard believed that the property consisted of

four lots that could be re-sold individually.

       Chicago Title Insurance Company issued a preliminary commitment and title

insurance policy in connection with the sale. The policy described the covered property

as "Lots 1,2,3 and 4, as delineated on Short Plat No. 865" and included a copy of the

short plat that depicted four lots. CP at 141. The short plat copy bore a stamp that stated,

"This plat is for your aid in locating your land with reference to streets and other parcels.

While this plat is believed to be correct, the company assumes no liability for any loss

occurring by reason of reliance thereon." CP at 145.

       In the summer of2011, Ms. Shepard decided to sell two of the lots. She contacted

the Benton County Planning Department to inquire about whether one well could be used

as a community well for two of the four lots and to learn about the septic requirements.

According to Ms. Shepard, the head of the planning department told her at that time that

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No. 31740-4-III
Shepard v. Holmes

in 1998 the owner ofthe property had recorded a "Deed of Consolidation" that

consolidated the four lots into a single parcel. CP at 27. The planning department head

reportedly told her that she could have rescinded the deed in 2007 after she purchased the

property, but that she could no longer sell the lots separately because county density

requirements had since changed. Our record includes no declaration of the planning

department head nor does it contain a copy of the Deed of Consolidation. We rely, as the

parties evidently did, on Ms. Shepard's report of what she was told. I

       Ms. Shepard filed a claim of loss with Chicago Title, which responded after

investigation that neither the existence of the consolidation deed nor the intervening

change in zoning requirements presented a loss insured by the title policy.

       In December 2012, Ms. Shepard filed a complaint for breach of contract;

misrepresentation; violations of the Washington Consumer Protection Act (CPA), chapter

19.86 RCW; and failure to pay an insurance claim in bad faith. She named as defendants

David and Lorraine Holmes, who had sold the property to Ms. Shepard and her former

husband; Sun River, the Holmeses' real estate agent; and Chicago Title. The complaint

alleged that Ms. Shepard was told by the Holmeses, "through their real estate agent

ERA," and "by others including Chicago Title," that the individual lots could be

separately sold, and that these misrepresentations induced her to purchase the property.

       IMs. Shepard's amended complaint describes the consolidation instrument as a
quitclaim deed "purport[ing] ... to consolidate the four parcels back into one." CP at

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No. 31740-4-111
Shepard v. Holmes

CP at 2. She alleged that the property had less value if it had to be sold as a single,

undivided parcel rather than as four separate lots.

         In the section of her complaint entitled "Causes of Action," Ms. Shepard alleged a

claim for breach of contract against the Holmeses, claims of misrepresentation and

violation of the CPA against Sun River, and claims of misrepresentation and bad faith

(failure to pay a covered claim and disclose recorded defects of title) against Chicago

Title.

         Within a couple of months of Ms. Shepard's filing the complaint, Sun River

moved to dismiss her misrepresentation and CPA claims against it pursuant to

CR l2(b)( 6), arguing that the claims were time barred on their face. Ms. Shepard

responded that the discovery rule applied to her claims, with the result that the statutes of

limitation did not begin to run until she discovered the existence of the consolidation

deed in 2011. She also brought to the court's attention that she had not had a copy of her

real estate purchase and sale agreement at the time she filed her complaint and had only

recently been able to obtain a copy, by subpoena.

         The trial court conducted hearings on Sun River's motion in March. Because the

parties had submitted declarations addressing matters outside of the scope of the

pleadings, the trial court treated the motion as one for summary judgment. At the

conclusion of the hearings, the trial court orally ruled that the recorded consolidation

314.
                                              4
No. 31740-4-III
Shepard v. Holmes

deed constituted constructive notice to all subsequent purchasers of the property, with the

result that Ms. Shepard's causes of action for negligent misrepresentation and violation of

the CPA accrued no later than the closing of her purchase of the property in July 2007.

Because more than five years had passed before she filed her complaint, the three- and

four-year statutes of limitations for the misrepresentation and CPA claims, respectively,

had run.

       In ruling on the motion, the court observed that while Ms. Shepard had made

reference in her opposition to a recently discovered contract, "[t]here is no claim for

breach of contract that has been filed in this case in regard to [Sun River]." Report of

Proceedings (RP) (Mar. 29, 2013) at 29.

       Ms. Shepard immediately responded that "the complaint does allege a breach of

contract." Id. She asked, ifher pleading was not sufficiently specific, that she be

permitted to file a motion to amend the complaint to assert a claim of breach of written

contract claim against Sun River-a claim subject to a six-year statute of limitations, and

that would not be time barred. See RCW 4.16.040(1). Without entertaining further

argument, the trial court reiterated that it had reviewed the complaint, saw no breach of

contract claim against Sun River, and was denying the request for leave to file a motion

to amend.

       In early May, after being served with Sun River's proposed order dismissing her

claims and a notice of presentment, Ms. Shepard filed a written motion for leave to

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No. 31740-4-III
Shepard v. Holmes

amend her complaint along with a proposed amended complaint. The amended

complaint included an allegation that Sun River was a "signatory party" to the purchase

and sale agreement by which Ms. Shepard and her former husband purchased the

property. CP at 313.

       The court addressed Sun River's proposed dismissal order, a request by Sun River

for attorney fees, and Ms. Shepard's motion to amend at a hearing held on May 17. At

Sun River's request, the court first entertained presentment of the order dismissing the

claims against Sun River. The court signed the order as presented. It then addressed Ms.

Shepard's motion to amend.

       With the order of dismissal having been entered, Sun River argued that it was no

longer a party to the action, rendering Ms. Shepard's motion to amend untimely, and

alternatively, that amendment was futile. The trial court agreed that the motion to amend

was untimely and denied it.

       The court awarded Sun River attorney fees in the amount of$8,413, finding that

by the terms of the real estate purchase and sale agreement, Sun River, as the real estate

broker or licensee, was entitled to its attorney fees from litigation arising out of the real

estate transaction.

       Meanwhile, in eady April, Chicago Title had filed its own motion for summary

judgment. It argued, as Sun River had, that Ms. Shepard's misrepresentation and CPA

claims were time barred. It also argued that her bad faith claims failed as a matter of law

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No. 31740-4-III
Shepard v. Holmes

on the merits because it was undisputed that (1) it had investigated and resolved her claim

under its policy, (2) it had no duty to disclose the consolidation deed, and (3) its title

policy did not cover the claim.

       Once again, Ms. Shepard argued that the court should apply the discovery rule in

determining when her causes of action accrued. She did not respond to Chicago Title's

arguments that her bad faith claims failed as a matter of law on the merits.

       The hearing on Chicago Title's motion was held in late May. The court granted

the motion.

       Ms. Shepard appeals the orders dismissing her claims against Sun River and

Chicago Title, the court's denial of her oral and written motions for leave to amend her

complaint, and the order awarding attorney fees to Sun River.

                                         ANALYSIS

       Ms. Shepard fails to make assignments of error in her opening brief, but it is clear

from her argument that she asserts four. She argues that the court erred or abused its

discretion in (1) concluding that her misrepresentation and CPA claims were time barred,

(2) concluding that her original claim did not sufficiently plead a contract claim against

Sun River, (3) denying her leave to amend her complaint to assert a contract claim, and

(4) awarding attorney fees to Sun River. We address the issues in tum.

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No. 31740-4-II1
Shepard v. Holmes

        l. 	   The trial court correctly concluded that the misrepresentation and
                                  CPA claims were time barred

       A three-year statute of limitations applies to claims for misrepresentation and

fraud. RCW 4.l6.080(4) (fraud); Davidheiser v. Pierce County, 92 Wn. App. 146, 156

n.5, 960 P.2d 998 (1998) (negligent misrepresentation is subject to limitations period for

fraud). A four-year statute of limitations applies to CPA claims. RCW 19.86.l20;

Pickettv. Holland Am. Line-Westours, Inc., 145 Wn.2d 178, 196,35 P.3d 351 (2001).

       RCW 4.l6.080(4) provides that an action for relief upon the ground of fraud is

"not to be deemed to have accrued until the discovery by the aggrieved party of the facts

constituting the fraud." RCW 19.86.120 provides more generally that a claim for

damages under the CPA is barred unless commenced "within four years after the cause of

action accrues."

       The general rule is that "[a] cause of action accrues and the statute of limitations

begins to run when a party has the right to apply to a court for relief." OJNeil v. Estate of

Murtha, 89 Wn. App. 67, 69-70, 947 P.2d 1252 (1997). A party has the right to apply to

a court for relief "when the plaintiff can establish each element ofthe action." Hudson v.

Condon, 101 Wn. App. 866,874,6 P.3d 615 (2000).

       The discovery rule is an exception to the general rule of accrual, and has been

applied by Washington courts to claims where "injured parties do not, or cannot, know

they have been injured." In re Estates ofHibbard, 118 Wn.2d 737, 744-45,826 P.2d 690

                                              8

No. 31740-4-III
Shepard v. Holmes

(1992). "The decision to extend the discovery rule to a cause of action is essentially a

matter ofjudicial policy." Denny's Rests., Inc. v. Sec. Union Title Ins. Co., 71 Wn. App.

194, 216, 859 P .2d 619 (1993). Where the discovery rule applies, "a cause of action

accrues when the plaintiff, through the exercise of due diligence, knew or should have

known the basis for the cause of action." Green v. Am. Pharm. Co., 86 Wn. App. 63, 66,

935 P.2d 652 (1997), ajJ'd, 136 Wn.2d 87, 960 P.2d 912 (1998).

       RCW 4.16.080(4) effectively codifies the discovery rule as the basis on which a

claim for fraud or misrepresentation accrues. See First Md. Leasecorp v. Rothste in, 72

Wn. App. 278,282,864 P.2d 17 (1993) (characterizing RCW 4.16.080(4) as "a

discovery-rule exception to the 3-year accrual period"). In applying the discovery rule,

actual knowledge of fraud will be inferred for purposes of the statute if the aggrieved

party, by the exercise of due diligence, could have discovered it. Strong v. Clark, 56

Wn.2d 230, 232, 352 P.2d 183 (1960). The discovery rule can also apply to CPA claims.

Pickett v. Holland Am. Line-Westours, Inc., 101 Wn. App. 901, 913, 6 P.3d 63 (2000),

rev'd on other grounds by 145 Wn.2d 178.

       One instance in which actual discovery will be inferred is where the facts

constituting the fraud were a matter of public record. As our Supreme Court explained in

Davis v. Rogers, 128 Wash. 231, 236,222 P. 499 (1924), where facts constituting

fraudulent acts were matters of public record, and thus "easily ascertainable," the public

record serves as "constructive notice to all the world of its contents." "[T]he defrauded

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No. 31740-4-111
Shepard v. Holmes

party cannot be heard to say that he has not discovered the facts showing the fraud within

the limit of the statute if the facts should have been discovered prior to that time by

anyone exercising a reasonable amount of diligence." ld at 235-36.

       The court applied this principle in Strong, which dealt with constructive notice of

an alleged fraudulent conveyance. Owners of a farm entered into a written lease of their

farm ground that included a grant to the tenants of an option to purchase the farm. The

lease and option were recorded in 1952. The tenants exercised the option in 1956, and

the owner-lessors accepted payment and executed a deed. Strong, 56 Wn.2d at 231. Two

years later, the now-former owner-lessors were adjudicated bankrupts. ld The

bankruptcy trustee, acting on behalf of creditors, thereafter sued to set aside the deed on

the basis that the option included in the lease was supported by inadequate consideration

and was a fraudulent conveyance. The trial court dismissed the suit, finding that it was

barred by the statute of limitations. ld. at 232.

       On appeal, our Supreme Court held that the action was properly dismissed.

Because actual knowledge of fraud will be inferred if the aggrieved party, by the exercise

of due diligence, could have discovered it, the creditors were deemed to have discovered

the alleged inadequacy of the consideration for the option when the lease was recorded in

1952. The recording gave "constructive notice to all persons that the owners had given

the tenants an option to purchase the property for the consideration specified therein." ld.

at 233. As observed in Aberdeen Federal Savings & Loan Association v. Hanson, 58

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No. 31740-4-111
Shepard v. Holmes

Wn. App. 773,777,794 P.2d 1322 (1990), Strong stands for the proposition that "the

recording of an instrument affecting- real property is constructive notice to all those who

subsequently acquire an interest in the property and have reason to refer to the record in

which the document is recorded."

       On the basis of this authority, Sun River and Chicago Title argued that Ms.

Shepard's misrepresentation and CPA claims accrued at the time she closed her purchase

of the Holmeses' property in July 2007, with the result that the three- and four-year

statutes of limitations had run before she commenced her lawsuit five and one-half-years

later, in December 2012.

       We review summary judgment decisions de novo, performing the same inquiry as

the trial court. Hisle v. Todd Pac. Shipyards Corp., 151 Wn.2d 853, 860,93 P.3d 108

(2004). In reviewing dismissal of a claim on summary judgment, we "consider[ ] the

facts and the inferences from the facts in a light most favorable to the nonmoving party."

Jones v. Allstate Ins. Co., 146 Wn.2d 291,300,45 P.3d 1068 (2002). Summary judgment

is appropriate where there is "no genuine issue as to any material fact and that the moving

party is entitled to a judgment as a matter of law." CR 56(c).

       Like the option to purchase in Strong, the deed of consolidation in this case was

subject to the recording statute, RCW 65.08.070. "Conveyances" required to be recorded

under the statute include "every written instrument by which any estate or interest in real

property is created, transferred, mortgaged or assigned or by which the title to any real

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No. 31740-4-111
Shepard v. Holmes

property may be affected." RCW 65.08.060(3) (emphasis added). The deed of

consolidation affected title to the property.

        When she purchased the property in July 2007, Ms. Shepard was therefore on

constructive notice of the existence of the consolidation deed. Any statement or omission

that she contends misled her had to have taken place before she purchased in order to

have proximately caused her loss. If she sustained damage as a result of the alleged

misrepresentation, it was because she acquired property that no longer enjoyed the

development rights that vested when the parcel was short platted; that damage arose as

soon as she closed the purchase. Because these and all other elements of

misrepresentation and any violation of the CPA would have existed on the date Ms.

Shepard purchased the property, Sun River and Chicago Title correctly argued that her

misrepresentation and CPA claims accrued, and the statutes of limitations began to run, at

that time. 2

        2 The six elements of negligent misrepresentation are (1) that a defendant supplied
infonnation for the guidance of others in their business transactions that was false, (2) the
defendant knew or should have known that the infonnation was supplied to guide the
plaintiff in business transactions, (3) the defendant was negligent in obtaining or
communicating false infonnation, (4) the plaintiff relied on the false infonnation supplied
by the defendant, (5) that the plaintiffs reliance on the false information supplied by the
defendant was justified, and (6) the false infonnation was the proximate cause of
damages to the plaintiff. Borish v. Russell, 155 Wn. App. 892, 905 n.7, 230 P.3d 646
(2010).
        To establish a CPA violation, the plaintiff must prove (1) an unfair or deceptive
act or practice, that (2) occurs in trade or commerce, (3) impacts the public interest,
(4) and causes injury to the plaintiff in her business or property, and (5) the injury is

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No. 31740-4-111
Shepard v. Holmes

        . Ms. Shepard objects that applying the rule in Strong transforms the limitation

period under RCW 4.16.080(4) into a disfavored statute of repose, because the limitation

period would have begun running in 1998 and expired even before she purchased the

property. "A statute of repose potentially bars a suit before the cause of action even

arises." Rothstein, 72 Wn. App. at 282. Ms. Shepard cites Strong as holding that

'" [w]hen the facts upon which the fraud is predicated are contained in ... the public

record ... the statute a/limitations begins to run at the date a/the recording a/the

instrument.''' Br. of Appellant at 18 (emphasis added) (quoting Strong, 56 Wn.2d at

232).

         It is a mistake to read this statement in Strong in isolation. Strong did not purport

to change the law as to when a cause of action accrues. Read in its entirety, it did not

hold that the recording of an instrument alone triggers the limitation period for any

misrepresentation ever made thereafter about the instrument's effect on title. Implicit in

the decision, even if not stated, is that with the recording of the lease in 1952, all of the

elements of the creditors' fraudulent conveyance claims existed. It was the fact that the

creditors' fraudulent conveyance action accrued in 1952 that caused the statute of

limitations to begin running, not the stand-alone fact that the lease was recorded at that

time.

causally linked to the unfair or deceptive act. Michael v. Mosquera-Lacy, 165 Wn.2d
595,602,200 P.3d 695 (2009).

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No. 31740-4-II1
Shepard v. Holmes

       Here, the trial court applied RCW 4.16.080(4) and RCW 19.86.120 as statutes that

limited the time within which Ms. Shepard must bring suit after her causes of action

accrued. The limitations periods did not begin to run in 1998, because she had not yet

been allegedly misled, taken action in reliance, and suffered resulting damage. The same

is true for her claims for violation of the CPA, which require proof of both "an unfair or

deceptive act" and a resulting injury. Westcott v. Wells Fargo Bank, NA, 862 F. Supp.

2d 1111 (W.D. Wash. 2012) (CPA claim accrued on or before date of closing). The trial

court (properly) recognized that it was not until the closing of her purchase in July 2007

that all elements of her claims existed and she had the right to apply to a court for relief.

       Ms. Shepard also contends that the constructive notice doctrine does not overcome

her right to rely on the "actual" representations of the parties; by "actual," she appears to

mean "explicit." But the Washington cases on which she relies do not support her

contention. None says or implies that explicit representations are treated differently from

implicit representations when a purchaser has constructive knowledge of true facts. Ms.

Shepard provides no authority or reasoned argument as to why well-settled case law

establishing that recorded documents provide constructive notice do not apply. See RAP

10.3(a)(6); McKee v. Am. Home Prods. Corp., 113 Wn.2d 701, 705, 782 P.2d 1045

(1989) ("We will not consider issues on appeal that ... are not supported by argument

and citation of authority. ").

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No. 31740-4-111
Shepard v. Holmes

       Both Sun River and Chicago Title argue that the trial court's orders dismissing

Ms. Shepard's claims against them on summary judgment can be affirmed on the

alternative basis that no misrepresentations were made at the time Ms. Shepard purchased

the property. While there is merit to this argument, we need not address it, since we are

able to affirm the trial court on the time bar basis on which it dismissed the claims.

       Because undisputed facts established that Ms. Shepard's misrepresentation and

CPA claims were time barred, summary judgment was appropriate.

                II.     The original complaint did not adequately plead a
                        breach ofcontract claim against Sun River

       Ms. Shepard next challenges the trial court's determination that her original

complaint failed to allege a breach of contract claim against Sun River.

       Under CR 8(a), a claim for relief must contain "a short and plain statement of the

claim showing that the pleader is entitled to relief' and "a demand for judgment for the

relief to which he deems himself entitled." Pleadings are intended "to give notice to the

court and the opponent of the general nature of the claim asserted." Lightner v. Balow,

59 Wn.2d 856, 858, 370 P.2d 982 (1962). Complaints are therefore construed liberally

"as to do substantial justice." CR 8(f). While a complaint may contain inexpert pleading,

"it may not contain insufficient pleading." Estate ofDormaier v. Columbia Basin

Anesthesia, PLLC, 177 Wn. App. 828, 853, 313 P.3d 431 (2013). A complaint is

insufficient if it does not give the defendant "fair notice of what the claim is and the

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No. 31740-4-III
Shepard v. Holmes

ground upon which it rests." Williams v. W. Sur. Co., 6 Wn. App. 300, 305, 492 P.2d 596

(1972).

       Ms. Shepard quotes isolated phrases from the section of her complaint entitled

"Contract Formation," patches them together in a convenient order and, from that, argues

that allegations of a contract with Sun River could be inferred. But no such inference

could or would reasonably be drawn from the "Contract Formation" section of her

complaint. While the section provides background and mentions Sun River, it speaks of

only one contract: it alleges that Ms. Shepard "entered into a purchase agreement to

purchase the four lotsfrom the Defendants, Holmes." CP at 2 (emphasis added).

       In the "Causes of Action" section of the complaint, Ms. Shepard specifies the

claims for relief that she asserts against each party. She asserts no claim for relief for

breach of contract against Sun River.

       At best, Ms. Shepard's complaint contains ambiguous language when it states, in

its section entitled "DefaultlBreach," that the Holmeses, Sun River, and Chicago Title

"have all breached their agreements with Plaintiff and have caused considerable

monetary damage." CP at 3. Nonetheless, by failing to identify when any contract was

made with Sun River, the substance of the contract, or the respect in which it was

breached, this allegation of a breach, without more, does not provide fair notice of a

contract claim and the ground upon which it rests.

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No. 31740-4-III
Shepard v. Holmes

       By no reasonable reading of Ms. Shepard's complaint, however broadly construed,

does it adequately allege a breach of contract claim against Sun River. The trial court did

not err.

              Ill.  Because the contract claim against Sun River asserted in Ms.
           Shepard's proposed amended complaint would have beenfutile, the denial
           ofher written motion to amend could not constitute an abuse its discretion

       Ms. Shepard next argues that the trial court abused its discretion in denying her

leave to file an amended complaint. Because Sun River had already filed a responsive

pleading when Ms. Shepard sought to amend her complaint, her right to amend as a

matter of course had expired. CR 15(a). She could amend the complaint "only by leave

of court or by written consent of the adverse party." Id.

       Although leave to amend is to be "freely given when justice so requires," id.,

"[t]he decision to grant leave to amend the pleadings is within the discretion of the trial

court." Wilson v. Horsley, 137 Wn.2d 500, 505, 974 P.2d 316 (1999). The trial court's

determination "will not be disturbed on review except on a clear showing of abuse of

discretion, that is, discretion manifestly unreasonable, or exercised on untenable grounds,

or for untenable reasons." State ex reI. Carroll v. Junker, 79 Wn.2d 12,26,482 P.2d 775

(1971).

       "The touchstone for the denial of a motion to amend is the prejudice such an

amendment would cause to the nonmoving party." Wilson, 137 Wn.2d at 505. "In

determining whether prejudice would result, a court can consider potential delay, unfair

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No. 31740-4-111
Shepard v. Holmes

surprise, or the introduction of remote issues." Karlberg v. Otten, 167 Wn. App. 522,

529,280 P.3d 1123 (2012). A court may also consider whether the new claim is futile or

untimely. Ina Ina, Inc. v. City ofBellevue, 132 Wn.2d 103,142,937 P.2d 154,943 P.2d

1358 (1997). Where, as here, a motion to amend is made "after the adverse granting of

summary judgment, the normal course of proceedings is disrupted and the trial court

should consider whether the motion could have been timely made earlier in the

litigation." Doyle v. Planned Parenthood ofSeattle-King County, Inc., 31 Wn. App. 126,

130-31,639 P.2d 240 (1982).

       In this case, the complaint was dated November 14,2012. It appears to have been

served on, or delivered to, the defendants or their lawyers in December. Sun River

appeared through its lawyer on January 25, 2013. It filed its motion to dismiss Ms.

Shepard's complaint one month later.

       Ms. Shepard orally moved to amend the complaint to add a breach of contract

claim against Sun River on March 29 (within three months of commencing her action),

after the trial court ruled that her misrepresentation and CPA claims were barred by the

statute of limitations. After the court denied her oral motion as untimely, she filed a

written motion for leave to amend on May 9, less than five months after commencing her

action. That motion was also denied.

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No. 31740-4-II1
Shepard v. Holmes

       The court reasonably denied Ms. Shepard's oral motion to amend her complaint

made at the March 29 hearing, because a copy of her proposed amended pleading was not

provided to the court and affected parties as required by CR 15(a).

       The written motion filed thereafter would present a much more difficult issue had

the proposed amended complaint pleaded a potentially meritorious breach of contract

claim, especially given Ms. Shepard's showing that she had been unable to obtain a copy

of the written contract until after commencing the litigation. Because the parties were

only five months into the litigation, it would have been difficult to find prejudice to Sun

River. Sun River's successful gambit of having the trial court enter its order of dismissal

before the motion to amend was heard would not make the issue any easier, because the

trial court's decision to dismiss the claims before considering the request to amend would

itself be reviewable for abuse of discretion.

       We need not decide whether the trial court abused its discretion in treating the

motion for leave to amend as untimely, however, because we can affirm denial of the

motion on the basis that amendment would have been futile. We may affirm the trial

court on any ground supported by the record whether or not the court considered that

ground. LaMon v. Butler, 112 Wn.2d 193,200-01, 770 P.2d 1027 (1989). It is clear as a

matter of law that Ms. Shepard pleaded no viable contract claim against Sun River.

       While Sun River was a signatory to the agreement, it signed in its capacity as the

Holmeses' disclosed agent. "One who makes a contract only on account of another

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No. 31740-4-111
Shepard v. Holmes

ordinarily does not himself contemplate responsibility for its performance. His function

is performed if he causes a contract to be made between his principal and the third

person." RESTATEMENT (SECOND) OF AGENCY § 328 (1958); Griffiths & Sprague

Stevedoring Co. v. Bayly, Martin & Fay, Inc., 71 Wn.2d 679, 686, 430 P.2d 600 (1967)

("[W]hen an agent makes a contract on behalf of a disclosed or partially disclosed

principal whom he has power to bind, he does not thereby become liable for his

principal's nonperformance.").

       Because Sun River was not a party to the purchase and sale agreement, Ms.

Shepard cannot point to any duty on Sun River's part arising from the agreement. She

alleges that Sun River breached a contract by "misrepresent[ing] the real property as four

separate lots" in the multiple listing service listing and the purchase and sale agreement,

CP at 316, but a misrepresentation is not a breach of contract unless made by a party who

has explicitly represented and warranted in the contract that certain facts are or will be

true at the time of closing. Sun River has no duty under the purchase and sale agreement,

let alone that duty.

       Because amendment of Ms. Shepard's complaint to add a breach of written

contract claim would have been futile, the court did not abuse its discretion in denying

leave to amend.

                                             20 

No. 31740-4-III
Shepard v. Holmes

                      IV. The trial court properly awarded attorney fees

       The trial court awarded fees and costs to Sun River based on the following

language in the purchase and sale agreement signed by Ms. Shepard:

       ATTORNEY FEES/COSTS AND MEDIATION: Ifthe Buyer, Seller, or
       any real estate licensee or broker involved in this transaction is involved in
       any dispute relating to this transaction, any prevailing party shall recover
       reasonable attorney's fees and costs (including those for appeals) which
       relate to the dispute.

CP at 109 (emphasis added). Ms. Shepard argues it was error to rely on the purchase and

sale agreement to award attorney fees because the trial court concluded that Ms. Shepard

did not assert a breach of contract claim against Sun River. She does not argue that the

fees awarded were unreasonable.

       Washington law generally provides for an award of attorney fees when authorized

by contract, a statute, or a recognized ground of equity. Labriola v. Pollard Group, Inc.,

152 Wn.2d 828,839, 100 P.3d 791 (2004); Bingham v. Lechner, 111 Wn. App. 118, 133­

34,45 P.3d 562 (2002) (stating that the party that prevails in a proceeding to foreclose a

deed of trust is entitled to an awar4 of fees if the deed of trust provides for such an

award). The contractual right is the source of any entitlement to fees. Excelsior Mortg.

Equity Fund 11, LLC v. Schroeder, 171 Wn. App. 333, 346, 287 P.3d 21 (2012). Whether

a specific statute, contractual provision, or recognized ground in equity authorizes an

award of attorney fees is a question of law that we review de novo. Tradewell Grp., Inc.

v. Mavis, 71 Wn. App. 120, 126,857 P.2d 1053 (1993).

                                             21 

No. 31740-4-111
Shepard v. Holmes

       The creation of a third party beneficiary contract requires that the parties intend

that the promisor assume a direct obligation to a third party at the outset of the contract.

Lewis v, Boehm, 89 Wn. App. 103, 106,947 P.2d 1265 (1997) (citing Burke & Thomas,

Inc. v, Int'l Org. ofMasters, Mates & Pilots, 92 Wn.2d 762,767,600 P.2d 1282 (1979».

To determine if a third party beneficiary exists, the court should consider the terms of the

contract and determine if performance of the contract necessarily and directly benefits a

third party. Id. (citing Del Guzzi Constr. Co. v, Global Nw, Ltd., 105 Wn.2d 878,886-87,

719 P.2d 120 (1986», Where a real estate purchase and sale agreement explicitly

provides for a party's payment to the real estate broker under disclosed circumstances, it

is clear that the broker is a third party beneficiary to the contract. Id.

       The trial court's award of attorney fees was not inconsistent with its conclusion

that Ms. Shepard could not sue Sun River for breach of contract. A third party

beneficiary is one who is not a party to the contract but will receive a direct benefit from

the contract. McDonald Constr, Co. v. Murray, 5 Wn. App. 68, 70,485 P.2d 626 (1971).

Attorney fees were properly awarded to Sun River.

                                V.     Attorney fees on appeal

       Sun River and Chicago Title both request attorney fees on appeaL RAP 18.1

permits recovery of reasonable attorney fees or expenses on review if applicable law

grants that right.

                                               22
No. 3 I 740-4-II1
Shepard v. Holmes

       As already determined, the purchase and sale agreement provides for Sun River's

recovery of attorney fees and costs, including on appeal, if it becomes involved in any

dispute relating to the transaction. We award Sun River its reasonable fees and costs on

appeal subject to its compliance with RAP 18.1(d).

       Chicago Title requests attorney fees on appeal on the basis that Ms. Shepard's

appeal is frivolous. "An appeal is frivolous if, considering the entire record, it has so

little merit that there is no reasonable possibility of reversal and reasonable minds could

not differ about the issues raised." Johnson v. Mermis, 91 Wn. App. 127, 137,955 P.2d

826 (1998). We do not regard Ms. Shepard's arguments as frivolous, and deny Chicago

Title's request for fees.

       Affirmed, with an award of fees and costs on appeal to Sun River.

       A majority of the panel has determined this opinion will not be printed in the

Washington Appellate Reports, but it will be filed for public record pursuant to

RCW 2.06.040.

WE CONCUR: 

Brown, J.

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