Court Opinion

ID: 4708506
Source: CourtListenerOpinion
Date Created: 2021-08-02 22:18:19.373507+00
Date Added: 2024-06-11T08:06:51.143623
License: Public Domain

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

RUHI SARIYILDIZ,                       )                No. 81663-2-I
                                       )
                          Appellant,   )                DIVISION ONE
                                       )
                v.                     )
                                       )
NIHAT KUSKU and FATMA TATLISOZ, )
husband and wife, individually and the )
marital community composed thereof; )
KS CONSTRUCTION, LLC, a                )
Washington limited liability company;  )                UNPUBLISHED OPINION
SENA CONSTRUCTION, LLC, a              )
Washington limited liability company;  )
CLOVERDALE STREET, LLC, a              )
Washington limited liability company;  )
and MERGEN INVESTMENTS, LLC, a )
Washington limited liability company,  )
                                       )
                          Respondents. )

       BOWMAN, J. — Ruhi Sariyildiz appeals the trial court’s order disbursing

funds following dissolution of the construction company he owned with Nihat

Kusku. He alleges the trial court erred in its mathematical calculations, leading to

incorrect disbursements to the parties. Because the trial court failed to include all

sources of income in its calculation of the company’s “cash on hand” at the time

of trial, we reverse and remand.

     Citations and pin cites are based on the Westlaw online version of the cited material.
No. 81663-2/2

                                       FACTS

       Sariyildiz and Kusku were friends turned business partners. Sariyildiz had

experience in construction and Kusku had money to invest in real estate

development as well as a background in accounting. Together, they started a

construction business, KS Construction LLC. Kusku made an initial capital

contribution of $300,000 to the business. Because Sariyildiz had poor credit and

no money to contribute, the parties agreed that half of the initial capital

contribution would amount to a loan from Kusku to Sariyildiz to repay later. As

partners, both Sariyildiz and Kusku agreed to split costs and profits evenly and

pledged to “contribute each of their ‘complete potential’ and ‘devote their full time

for this business.’ ” Kusku formed KS as a Washington limited liability company

and obtained business and general contractor licenses. Both the LLC and

business license were in Kusku’s name because of Sariyildiz’s financial situation.

       Soon after, Sariyildiz found an uninhabitable duplex property (Duplex) for

sale. Kusku bought the property and titled it in his name only. Both Sariyildiz

and Kusku worked on improvements to the Duplex, with Sariyildiz doing most of

the manual labor. Eventually, KS rented the Duplex to tenants. While Sariyildiz

and Kusku looked for another development opportunity, KS performed

construction work for third parties. Sariyildiz worked the labor for the jobs. Over

time, Sariyildiz and Kusku took draws from KS for living expenses, split evenly

between the two of them.

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No. 81663-2/3

       Sariyildiz found three undeveloped residential parcels for sale near the

Duplex. The partners agreed to buy the vacant lots and build three new single-

family residences (8th Street Project). Kusku bought the properties for KS to

develop. To fund construction of the three houses, KS secured a $750,000 loan

from “hard money lenders” Alan Ehrlich and Sigrid Broderson (collectively

Ehrlich).

       When construction on the 8th Street Project was about half complete,

Kusku became concerned that KS could not finish the work without more funds.

Kusku wanted Sariyildiz to contribute $500,000 to KS in order to complete the 8th

Street Project. Kusku knew Sariyildiz could not contribute the money, but he

blamed Sariyildiz for “poor management” of the project. He believed Sariyildiz

“overstated his qualifications” and was unable to complete the 8th Street Project.

Kusku told Sariyildiz to contribute equally to KS or give up his share of the

Duplex. Sariyildiz refused to do either. The relationship between Sariyildiz and

Kusku deteriorated.

       Meanwhile, Kusku’s brother-in-law Serif Ali Mergen moved to Seattle.

Mergen had loaned Kusku money to purchase the Duplex and the parcels for the

8th Street Project. Kusku and Mergen agreed to finish construction of the 8th

Street Project together and exclude Sariyildiz from receiving any profit from the

four properties. Mergen and Kusku formed Mergen Investments LLC and Kusku

transferred all KS properties to the new company. Kusku also formed Sena

Construction LLC. The two new companies executed a joint venture to complete

                                         3
No. 81663-2/4

the 8th Street Project. Mergen and Kusku secured another $500,000 in loans

from Ehrlich to fund the work.

        Sariyildiz sued Kusku and asserted several claims, including breach of

contract, breach of fiduciary duty, and tortious interference with his business

interest. Kusku counterclaimed, alleging breach of contract among several other

claims. The parties proceeded to bench trial on their competing breach of

contract claims.

        After trial, the court entered extensive findings of fact and conclusions of

law (FFCL). The court concluded Kusku breached the parties’ contract and

found for Sariyildiz “in an amount to be determined after all the assets belonging

to KS are verified and sold.” The court found that KS (1) secured $1,250,000.00

in loans from Ehrlich, (2) earned $92,391.00 in rental income from the Duplex

with related expenses of $50,586.32, (3) earned $155,000.00 from third-party

construction jobs with related expenses of $144,092.26, and (4) paid

$192,574.44 in draws for living expenses. The court requested more argument

on how best to windup the KS business and reimburse Kusku for his

$390,000.00 in capital contributions.1

        Kusku moved for reconsideration, asking the court to reassess the income

and expenses related to the Duplex and 8th Street Project. In an order granting

defendants’ motion for reconsideration in part and modifying its FFCL, the court

adjusted the Duplex income to $131,791.00 and adjusted the costs associated

        1
         In addition to the original $300,000, Kusku contributed another $90,000 to complete the
purchase of the Duplex and the 8th Street Project. Sariyildiz does not dispute that KS should
reimburse Kusku for his total $390,000 investment.

                                               4
No. 81663-2/5

with the 8th Street Project. The court then calculated the amount of cash that KS

had on hand. It concluded:

       The original loan amount, $1,250,000.00, received from . . . Ehrlich
       . . . had $148,885.46 remaining after deducting . . . construction
       costs . . . . However, the parties received advances/draws during
       the partnership totaling an uncontested amount of $192,574.44,
       with each party receiving half. The remaining $148,885.46 of the
       Ehrlich . . . loan was used to pay these advances.

The court subtracted the amount of the draws from the remaining loan money

and determined that KS had a deficit of $43,688.98. It then concluded that

Kusku must have “personally contributed the remaining $43,688.98,” making

Kusku’s total contribution to the company $433,688.98.

       The trial court appointed a general receiver to manage the windup of KS

because it was “clear that the parties are unable to wind down the LLC or

otherwise sell the property amicably.” Over the next six months, the receiver

sold the Duplex and 8th Street Project properties and repaid the loans to Ehrlich.

The receiver paid all outstanding claims and deposited the remaining

$550,000.00 into the court registry. Kusku filed a motion requesting

disbursement of $441,628.71 for his capital contribution of $433,688.98 plus 12

percent interest on his initial loan to Sariyildiz.

       Sariyildiz objected to the amount of disbursement. He argued the court

mistakenly determined KS had a deficit of cash at the time of trial because it did

not include net rental income from the Duplex or third-party construction work as

assets in its calculations. He showed that had the court included that income, KS

would have had a surplus of cash on hand rather than a deficit of $43,688.98.

Sariyildiz argued that as a result of the mistake, the court credited Kusku with

                                            5
No. 81663-2/6

contributing money to cover a deficit that did not exist, and that Kusku should be

entitled to only his $390,000.00 contribution. The trial court disagreed, granting

the motion to disburse and releasing $441,628.71 to Kusku.

        Sariyildiz moved to reconsider, arguing again that the court erroneously

determined Kusku’s contribution by crediting him $43,688.98 to cover a “cash

shortfall” that did not exist. The court found this to be “an attempt to relitigate

findings of fact from a year ago or to reconsider the findings of fact from a year

ago.” The court concluded the motion was untimely and denied reconsideration.2

        The parties then filed competing requests for final distribution of the funds,

attorney fees, and costs. The court found that $150,313.16 remained in the court

registry to be disbursed. Because Sariyildiz’s motion for reconsideration delayed

repayment of the entire amount of the original loan to Kusku, the trial court

determined that Kusku was entitled to additional interest accrued on his loan to

Sariyildiz. The court also concluded that Sariyildiz’s motion for reconsideration

was not “substantially justified” and awarded $1,476.00 in attorney fees and

costs to Kusku. The trial court then disbursed $74,788.11 to Sariyildiz and

$75,525.05 to Kusku.

        Sariyildiz appeals.

                                           ANALYSIS

        We review a court’s order disbursing funds for abuse of discretion. Wilson

v. Henkle, 45 Wn. App. 162, 166, 169, 724 P.2d 1069 (1986). “A trial court

abuses its discretion when its decision is manifestly unreasonable or based upon

        2
         The court also found that Sariyildiz did not follow the correct procedure for noting the
motion to shorten time to consider his reconsideration motion.

                                                 6
No. 81663-2/7

untenable grounds or untenable reasons.” Go2Net, Inc. v. C I Host, Inc., 115

Wn. App. 73, 88, 60 P.3d 1245 (2003).

Calculation of Cash on Hand

       Sariyildiz argues the trial court erred by refusing to consider his objection

to the order of disbursement and motion to reconsider. He asserts the court’s

failure to include rental and third-party work income when calculating KS’ cash on

hand at the time of trial led to overcompensating Kusku. Kusku claims the

“disbursement court properly concluded that Sariyildiz could not collaterally

attack a final judgment entered a year prior to the order of disbursement.” We

agree with Sariyildiz.

       A. Finality of Amended Findings

       Kusku claims Sariyildiz’s objection to the court’s order of disbursement

was “a collateral attack on an unappealed-from final decision entered a year

before the disbursement proceedings.” According to Kusku, Sariyildiz “had 30

days from entry of the [amended FFCL] to appeal” because the FFCL are “an

appealable decision” under RAP 2.2(a)(3). We disagree.

       A party must file a notice of appeal within “30 days after the entry of the

decision of the trial court.” RAP 5.2(a). Under RAP 2.2(a)(3), a decision is

appealable if it affects “a substantial right in a civil case that in effect determines

the action and prevents a final judgment or discontinues the action.” Kusku

offers no argument as to how the court’s amended FFCL prevented final

judgment or discontinued Sariyildiz’s and Kusku’s lawsuits. Indeed, the court

continued to hear argument from the parties and resolve disputes about KS

                                           7
No. 81663-2/8

assets and liabilities until it issued its order of disbursement almost a year after

entering its amended FFCL. The court’s amended FFCL did not trigger the 30-

day timeline for Sariyildiz to appeal under RAP 2.2(a)(3).

        Even so, Kusku cites State v. Scheel, 74 Wn.2d 137, 140, 443 P.2d 658

(1968), to argue, “Our Supreme Court has long held that an appeal from an order

disbursing funds from the court registry does not permit a collateral attack on the

underlying judgment.” But Scheel pertains to the collateral attack of a final

judgment entered after trial. Scheel, 74 Wn.2d at 138-39. Here, the trial court

entered amended FFCL but did not reduce the findings to a final judgment.3

        B. Collateral Estoppel

        Kusku next claims that Sariyildiz was “precluded by collateral estoppel

principles from relitigating the issue of Kusku’s capital contribution.” According to

Kusku, “[i]f no appeal is taken from a judgment entered by a court with subject

matter and personal jurisdiction, the judgment becomes subject to both res

judicata and collateral estoppel principles.”4

         Both res judicata and collateral estoppel “prevent relitigation of that which

has previously been litigated.” Luisi Truck Lines, Inc. v. Wash. Utils. & Transp.

Comm’n, 72 Wn.2d 887, 894, 435 P.2d 654 (1967). Res judicata prevents

relitigation of a cause of action. Luisi, 72 Wn.2d at 894. Collateral estoppel

precludes relitigation of issues. Christensen, 152 Wn.2d at 307. A party

        3
          We also note that Sariyildiz does not challenge the trial court’s substantive findings on
the value of KS assets. Rather, he points to a mathematical error in the court’s calculation of the
sum of those assets. A mathematical error is clerical in nature. See In re Marriage of King, 66
Wn. App. 134, 138, 831 P.2d 1094 (1992). Under CR 60(a), the trial court could have corrected
the clerical error “at any time.”
        4
        Citing Anderson v. Anderson, 52 Wn.2d 757, 328 P.2d 888 (1958); Christensen v. Grant
County Hosp. Dist. No. 1, 152 Wn.2d 299, 306, 96 P.3d 957 (2004).

                                                 8
No. 81663-2/9

asserting either collateral estoppel or res judicata must show the earlier

proceeding ended in a judgment on the merits. Christensen, 152 Wn.2d at 307;

Hanson v. City of Snohomish, 121 Wn.2d 552, 561-62, 852 P.2d 295 (1993).

        Here, the trial court’s amended FFCL did not amount to a final judgment

on the merits. Neither collateral estoppel nor res judicata barred Sariyildiz from

challenging the trial court’s calculations at disbursement.

        C. Error in Calculation of Assets

        Sariyildiz argues that the court’s calculation of cash on hand was not

accurate because it “fails to account for the net profits that KS received from the

Duplex and the third-party jobs.” Sariyildiz is correct.

        The trial court found the Duplex generated $81,204.68 in net income.5

The third-party work brought in a net profit of $10,907.74.6 As a result, KS

earned $92,112.42 in net profit that the court did not include in its calculation of

KS’ cash on hand. This is a clerical mistake that must be corrected because it

impacts the downstream division of money between the parties. The correct

calculation leads to a surplus of cash on hand at the time of trial rather than a

deficit of $43,688.98 that the court credited to Kusku. Without the shortfall, no

evidence supports Kusku’s additional capital investment beyond the undisputed

$390,000.00 that he used to purchase the four properties.7

        5
            $131,791.00 in rental income minus $50,586.32 in expenses.
        6
            $155,000.00 in income minus $144,092.26 in expenses.
         7
           Sariyildiz raises additional assignments of error related to the trial court’s calculations
for disbursement. Because the trial court must recalculate the assets of KS on remand, we do
not address these issues. Sariyildiz also claims the trial court “abused its discretion when it
denied Sariyildiz any consideration for Kusku’s unauthorized disposal” of a truck belonging to KS.
Sariyildiz makes no legal argument in support of his claim and we cannot conclude the trial
court’s decision was an abuse of discretion. RAP 10.3(a)(6).

                                                  9
No. 81663-2/10

Attorney Fees

        The trial court awarded Kusku attorney fees for responding to Sariyildiz’s

opposition to its order disbursing funds because the opposition was not

“substantially justified.” Because we disagree that Sariyildiz improperly sought to

relitigate the FFCL, we reverse that award. We also decline Kusku’s request for

attorney fees on appeal.8

        We reverse the order of disbursement and remand to the trial court to

include the net income from the Duplex and third-party construction work in

calculating KS’ cash on hand at the time of trial and to vacate the award of

attorney fees to Kusku.

WE CONCUR:

        8
          Kusku requests fees under RAP 18.9(a), which allows an appellate court to award fees
as a sanction for a frivolous appeal. An appeal is frivolous if it presents no debatable issues and
is devoid of merit. Cox v. Kroger Co., 2 Wn. App. 2d 395, 410, 409 P.3d 1191 (2018).

                                                10