Court Opinion

ID: 4714065
Source: CourtListenerOpinion
Date Created: 2021-08-12 00:40:14.599382+00
Date Added: 2024-06-11T08:07:20.761236
License: Public Domain

Stephens, J.
¶10 (dissenting) — The question before us is whether the trial court erred in dismissing appellant Otis Housing Association, Inc.’s (OHA) action to compel arbitration, brought under former chapter 7.04 RCW, repealed by Laws of 2005, ch. 433, § 50. The Court of Appeals, Division Three affirmed, agreeing with the trial court that the arbitration clause invoked by OHA was “void” once the deadline for exercising the option under the contract expired. Otis Hous. Ass’n v. Ha, 140 Wn. App. 470, 475, 164 P.3d 511 (2007). It also awarded respondents John and Min Ha (the Has) attorney fees under the contract. We should reverse because the lower court dismissed the motion to compel arbitration by improperly resolving the very question an arbitrator would be asked to decide. While the majority does not repeat this same mistake, it holds that OHA waived its right to arbitrate, but the record does not support this conclusion. I respectfully dissent.
*590FACTS
¶11 OHA and the Has had entered into a lease and contract for an option to buy the Otis Hotel in downtown Spokane. An addendum to the option contract provided that the option had to be exercised no later than December 31, 2004. That date came and went, and OHA stopped paying rent under the lease. The Has then brought an unlawful detainer action. OHA answered and raised as a defense that it had exercised the option, thus creating a purchase and sale arrangement, rather than a lease, so that the Has would have to institute foreclosure proceedings to regain possession.
¶12 At the show cause hearing, the unlawful detainer court held that OHA broke the lease and the Has were entitled to restitution. No issues were bound over for trial — the court simply issued a restitution order. At oral argument, counsel for the Has described the unlawful detainer judge’s statements about the option contract as “dicta.” Wash. Supreme Court oral argument, Otis Hous. Ass’n v. Ha, No. 80626-8 (Sept. 25, 2008), at 37 min., 56 sec., audio recording by TVW, Washington State’s Public Affairs Network, available at http://www.tvw.org. OHA did not file an appeal in the unlawful detainer action, and it is not before us.
¶13 Instead, OHA served a notice of intent to arbitrate, invoking a provision of the contract requiring arbitration of disputes arising under the agreement. OHA also filed a lis pendens against the Otis Hotel. When the Has refused to arbitrate, OHA brought an action to compel arbitration under former chapter 7.04 RCW. The judge in the arbitration proceeding looked at the record from the unlawful detainer action and stated that he agreed with the judge in that action that OHA had not timely exercised the purchase option. For this reason, he concluded the option contract— including the arbitration clause — had expired. Ironically, having held that the contract was void, the court nonethe*591less awarded attorney fees to the Has under the contract. The judge quashed the lis pendens and dismissed the motion to compel arbitration.
¶14 OHA appealed. The Court of Appeals, Division Three affirmed on the basis that the option expired as of December 31, 2004 without being exercised, with the result that the option contract, “including the arbitration clause, no longer had any force or effect; thus, it was void.” Otis Hous., 140 Wn. App. at 475. The appeals court awarded fees and costs to the Has as the “prevailing party” under the option contract and also indicated that fees were authorized under RCW 4.84.330. Id. OHA filed a petition for review, which we granted.
ANALYSIS
¶15 Because the majority resolves this case on the basis of waiver, it is important to take a close look at what was actually before the court at the show cause hearing in the unlawful detainer action. Unlawful detainer is a limited statutory proceeding, brought to resolve competing claims to the right of possession and a few related issues such as damages and rent due. See RCW 59.12.030; Puget Sound Inv. Group, Inc. v. Bridges, 92 Wn. App. 523, 526, 963 P.2d 944 (1998). The Has are correct that OHA raised the option exercise as an affirmative defense, if inartfully, and that this was arguably within the scope of the unlawful detainer action insofar as it affected title. See Kelly v. Powell, 55 Wn. App. 143, 150-51, 776 P.2d 996 (1989). This does not mean, however, that the issue was resolved at the show cause hearing. The court simply issued a restitution order, and no issues were bound over for trial. As the Has’ counsel acknowledged, the judge’s comments about whether OHA exercised the option were “dicta.”
¶16 At any rate, even if the unlawful detainer judge had purported to resolve the option contract dispute, the record does not support the conclusion that OHA waived its right to demand arbitration. While a contractual arbitration pro*592cedure may be waived, waiver requires a “ Voluntary and intentional relinquishment of a known right.’ ” Ives v. Ramsden, 142 Wn. App. 369, 383, 174 P.3d 1231 (2008) (quoting Lake Wash. Sch. Dist. No. 414 v. Mobile Modules Nw., Inc., 28 Wn. App. 59, 61, 621 P.2d 791 (1980)). The facts must show that the prior conduct of the party now demanding arbitration was “inconsistent with any other intention but to forego that right.” Shoreline Sch. Dist. No. 412 v. Shoreline Ass’n of Educ. Office Employees, 29 Wn. App. 956, 958, 631 P.2d 996, 639 P.2d 765 (1981), review denied, 97 Wn.2d 1009 (1982).
¶17 Ives, relied upon by the majority, illustrates an unequivocal waiver of arbitration. There, the defendant answered the complaint, engaged in extensive discovery, including deposing witnesses and proposing and answering interrogatories, and fully prepared for a trial on the merits. Ives, 142 Wn. App. at 384. Three years and four months of litigation passed without the defendant seeking arbitration; then, on the eve of trial, he raised it for the first time. Id. The Court of Appeals appropriately found a waiver on such facts.
¶18 Here, the facts are not so clear. While OHA raised the option contract as a defense in the unlawful detainer action, this was equally consistent with an intent to preserve the issue in the event a court later determined that the defense was required to be joined under chapter 59.12 RCW. See Kelly, 55 Wn. App. at 150-51. In other words, it may have been wise to raise the option issue as a defense to foreclose a later claim of waiver. The unlawful detainer judge did not resolve the issue but entered a restitution order. The majority’s analysis suggests that at this point, OHA was required to appeal and seek a trial on the option contract or ask the judge to stay the proceedings pending arbitration. But, chapter 59.12 RCW contains no such mandate. A proper means of seeking to compel arbitration is to bring an application under former chapter 7.04 RCW. See former RCW 7.04.040 (1943), repealed by Laws of 2005, ch. 433, § 50(4). That OHA followed this course seems to *593evidence an intent to pursue, not waive, the right to arbitration. At a minimum, it does not meet the high standard of conduct that is “inconsistent with any other intention but to forego that right.” Shoreline Sch. Dist. No. 412, 29 Wn. App. at 958. The record before us is not particularly developed on this issue because waiver was not the focus of the Has’ argument below. On this limited record, I disagree with the majority’s conclusion that OHA waived its right to arbitrate.
¶19 The only remaining question, then, is whether the arbitration clause “expired,” as the lower courts held. It clearly did not. The lower courts’ conclusion that the clause expired is based on the view that OHA did not timely exercise its option by the contract date of December 31, 2004. This is the very question the arbitrator would be asked to decide. By determining this issue, the court in the former chapter 7.04 RCW proceeding exceeded its limited jurisdiction. Because OHA filed only an application for arbitration under former chapter 7.04 RCW, the trial court was not exercising general superior court jurisdiction to determine the parties’ rights under the option contract, including the right to fees and costs. A motion to compel arbitration under former RCW 7.04.040 presents limited issues. See former RCW 7.04.020 (1982), repealed by Laws of 2005, ch. 433, § 50(2); Price v. Farmers Ins. Co. of Wash., 133 Wn.2d 490, 502-03, 946 P.2d 388 (1997); Sherry v. Fin. Indem. Co., 160 Wn.2d 611, 617-18, 160 P3d 31 (2007). The options available to the court are set forth in former RCW 7.04.040. The judge must compel arbitration unless there is a question as to the existence or validity of the arbitration clause itself. It is not appropriate to decide the merits of the contract dispute that the arbitrator would hear as a roundabout way of holding the clause invalid, which is what the court did here.
¶20 Moreover, setting aside the jurisdictional problem, just because a party has not timely exercised an option under a contract does not mean that the contract is thereafter “void.” Many contract provisions are designed to specify the *594method for resolving disputes about whether actions have been timely or properly taken under the contract. It makes no sense that these provisions die at the very moment they would be relevant, i.e., once a dispute arises as to whether an option was validly exercised. Further, if the arbitration clause was no longer effective because the option date had passed, why was the attorney fee provision still effective?
¶21 The trial court could have properly considered whether the right to arbitrate had been waived because this is a threshold question of arbitrability. See McKee v. AT&T Corp., 164 Wn.2d 372, 394-95, 191 P.3d 845 (2008) (noting threshold arbitrability issue is decided by court on motion to compel arbitration). However, that is not what the lower court did. We can generally affirm on any ground supported in the record. See RAP 2.5(a). But, the record here does not support the conclusion that OHA waived its right to arbitrate by engaging in conduct inconsistent with any intention other than to abandon arbitration. I would reverse.
ATTORNEY FEES AND COSTS
¶22 As noted above, notwithstanding the conclusion that the contract became void once the time for exercising the option closed, the lower courts awarded attorney fees and costs to the Has under the contract.4 The majority rejects OHA’s challenge to the fee award on the ground that OHA is not a prevailing party. This does not follow. Whether the Has were entitled to fees below turns on whether they were the prevailing party under the contract. Because the prevailing party cannot be determined until the merits of the underlying claims are properly determined, any award of fees should abide the final resolution of the parties’ dispute.
*595CONCLUSION
¶23 The question before us is narrow: was it error to dismiss the action to compel arbitration and award attorney fees and costs to the Has? The majority’s approach, by finding a waiver on these facts, suggests that a party will lose the right to arbitrate any time it raises (or perhaps even could have raised) an arbitrable defense in an unlawful detainer action that affects the question of title or possession. This undermines the policy favoring arbitration where the parties have agreed to this proceeding and lowers the high standard we have long adhered to before finding that a party has waived the right to arbitrate. Accordingly, I dissent.
Madsen, Sanders, and Fairhurst, JJ., concur with Stephens, J.

 The Court of Appeals also referenced ROW 4.84.330 as a basis for awarding fees and costs. Otis Hous., 140 Wn. App. at 475. The Has did not argue for fees under this statute, and it has no application here because the fee-shifting provision in the contract is available to either party. ROW 4.84.330 applies only when a contractual fee-shifting provision is one-sided, and it makes fees available to either prevailing party. Wachovia SBA Lending, Inc. v. Kraft, 165 Wn.2d 481, 488, 200 P.3d 683 (2009).