Court Opinion

ID: 4544983
Source: CourtListenerOpinion
Date Created: 2020-06-29 21:13:35.754972+00
Date Added: 2024-06-11T08:08:22.748753
License: Public Domain

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

SHAMIM MOHANDESSI; JOSEPH,              )       No. 77017-9-I consolidated with
GRACE, individually as residential      )       No. 77581-2-I
owners and derivatively on behalf of    )
2200 RESIDENTIAL ASSOCIATION,           )
a Washington non-profit corporation,    )
and derivatively on behalf of 2200      )       DIVISION ONE
CONDOMINIUM ASSOCIATION, a              )
Washington non-profit corporation,      )
                                        )
                      Appellants,       )
                                        )
                      v.                )
                                        )
URBAN VENTURE LLC, a Washington )
limited liability company; VULCAN, INC.,)
a Washington corporation; 2200          )
CONDOMINIUM ASSOCIATION, a              )
Washington non-profit corporation;      )
2200 RESIDENTIAL ASSOCIATION, a )
Washington non-profit corporation;      )
GARY ZAK, an individual, BRIAN          )
CROWE, an individual; BRANDON           )
MORGAN, an individual; and JOHN         )
DOES 1-15, individuals or entities,     )       PUBLISHED OPINION
                                        )
                      Respondents.      )
                                        )

      MANN, C.J. — This case concerns condominium assessments. Shamim

Mohandessi and Joseph Grace (collectively plaintiffs) appeal the trial court’s dismissal
No. 77017-9-I/2

of their claims against the 2200 Residential Association (RA), the 2200 Condominium

Association, Gary Zak, Brian Crowe, and Brandon Morgan (collectively MA), Urban

Venture LLC, and Vulcan, Inc., (all collectively defendants). The plaintiffs brought direct

and derivative claims alleging that the defendants violated the Washington

Condominium Act (Condominium Act), chapter 64.34 RCW, the Washington Consumer

Protection Act (CPA), chapter 19.86 RCW, breached statutory and fiduciary duties, and

tortiously interfered with the MA Board’s duties.

       The plaintiffs contend that the trial court erred in (1) concluding that the statute of

limitations barred their claims, (2) concluding that they could not bring claims

derivatively on behalf of the RA and MA, (3) concluding that they lacked standing to

bring claims against the MA for violations of the Condominium Act, (4) dismissing their

breach of contract claims against the RA, (5) sua sponte dismissing their claim that a

prior 2012 settlement agreement was void as the product of fraud and collusion, and (6)

awarding fees under the 2012 settlement agreement and costs under the Uniform

Declaratory Judgment Act, RCW 7.24.100. The defendants cross appeal and argue

that the trial court erred: (1) in concluding that the common expense liability allocation in

the master declaration violates the Condominium Act, RCW 64.34.224(1), and (2) in not

awarding their full attorney fees under the 2012 settlement agreement, or alternatively,

under the Condominium Act.

       We affirm.

                                             -2-
No. 77017-9-I/3

                                                   I.

A.      2200 Westlake

        This appeal concerns a mixed-use development located at 2200 Westlake

Avenue in downtown Seattle (2200 Westlake) comprising over 500,000 gross square

feet, excluding underground parking. Milliken Urban Limited Partnership (Milliken)

began the development of 2200 Westlake. Urban Venture LLC, a subsidiary of Vulcan

Inc., invested in the project and developed it jointly with Milliken. Urban Venture bought

out Milliken’s interest midway through construction in 2005.

        The development was completed in 2006. That same year Urban Venture

executed and recorded a “master declaration” under the Condominium Act, creating a

four-unit condominium called “2200, a condominium.” The four units include: (1) the

commercial unit, which leases 90,000 square feet of commercial retail shops; (2) the

hotel unit, housing the 153-room Pan Pacific Hotel; (3) the food unit, leased to Whole

Foods grocery store; and (4) the residential unit, comprised of 259 residential units,

which has a separate sub-condominium association.

        2200 Westlake is governed by, and acts through, the 2200 Condominium

Association, a nonprofit corporation, which the parties refer to as the Master Association

(MA).1 The owner of each unit of 2200 Westlake is a member of the MA. The MA is

administered by a four-person board, with each owner electing one representative to

hold the single vote allocated to each owner.

        In 2006, Urban Venture also recorded a separate declaration for the 259-unit

residential unit of 2200 Westlake. The “residential declaration” covers the 2200

        1
          The parties do not dispute that the 2200 Condominium Association is not actually a “master
association” as that term is defined in the Condominium Act, RCW 64.34.020(28), .276.

                                                  -3-
No. 77017-9-I/4

Residential Association (RA). The RA is also organized as a nonprofit corporation. The

RA board is elected by a majority of the residential unit owners. The RA board chooses

a single member to represent it on the MA Board.

       Urban Venture owned the commercial, hotel, and food store units from

completion of the project, until selling the units to third parties: the commercial unit in

March 2016, the food store unit in September 2016, and the hotel unit in February 2017.

During Urban Venture’s ownership, the MA board members were Vulcan employees,

appointed by Urban Venture. The initial board members were Gary Zak, Hamilton

Hazlehurst, and Brian Crowe.

B.     Common Expense Liability

       Central to this litigation is the common expenses associated with the common

elements of 2200 Westlake and the division of the common expenses between the four

condominium units in the MA. The master declaration defines the “Common Elements”

as “all portions of the Property and the Project which are outside the boundaries of a

Unit, and improvements within the boundaries of a Unit which are designated as

Common Elements or Limited Common Elements under the provisions of Article 3.”

“Common Expenses” are defined as:

       expenditures made by, or financial liabilities of the Association, together
       with any allocations to reserves. Common Expenses are funded by each
       Owner in accordance with its Allocated Interest, except that certain
       Common Expenses are specifically allocated to fewer than all Units or are
       specially allocated among Units based on usage or benefit, as more
       specifically set forth in Section 10.4.

       The common expense liability, and interest in the common elements, are

determined by the units’ declared value, which results in the “Allocated Interest

                                              -4-
No. 77017-9-I/5

Percentage.” Exhibit B to the MA declaration shows the unit data and allocated

interests for each unit.

                        Unit Floor                                              Parking
    Unit Name                          Declared Value     CEL/ICE     Votes
                      Area (Sq. Ft.)                                            Spaces
 Unit C               24,352           $11,340,000        6.3        1        90 covered
 (Commercial                                                                  36 uncovered
 Unit)
 Unit R               259,447          $138,960,000       77.2       1        318 covered
 (Residential Unit)
 Unit H (Hotel        120,309          $18,000,000        10.0       1        55 covered
 Unit)                                                                        2 uncovered
 Unit F (Food         43,616           $11,700,000        6.5        1        272 covered
 Store Unit)                                                                  12 uncovered
 Total                                 $180,000,000       100%       4

         “Declared value” is defined as “the value of each Unit as stated in Schedule B,

which does not necessarily reflect market value and will not be affected by sales price.”

In contrast, the preamble to the MA declaration indicates that concerns about fair

governance for all units culminated in “the decision to allocate many of the costs by

square footage (for the sake of simplicity) or, if feasible, by separate metered usage.”

The common element liability, however, does not correspond to square footage. The

RA declaration includes Schedule B, which allocates Unit R’s common element liability

to each condominium unit based on “relative area of Units.”

         The common expense liability allocation was set forth in the public offering

statement and governing documents were provided to every original buyer at 2200

Westlake before they bought their units. The public offering statement included a draft

budget for the MA and the RA. The MA declaration, including Exhibit B, were also

recorded.

                                             -5-
No. 77017-9-I/6

C.     Prior Litigation

       Plaintiff Grace bought a residential unit at 2200 Residential in 2006. Grace

considers himself an experienced real estate purchaser. Grace purchased a second

unit at 2200 Residential in 2015, after this litigation began. Plaintiff Mohandessi, an

attorney, purchased a residential unit at 2200 Residential in 2010.

       Grace has been in conflict with the RA since April 2007. In protest to the RA

Board’s actions and assessments, Grace stopped paying his full dues in 2008. The RA

sued Grace in 2011 and 2013 to collect unpaid dues and late charges.2 Grace asserted

defenses and counterclaims, alleging that the RA breached its fiduciary duty, committed

fraud, trespass, and conversion, and held an invalid election. The trial court dismissed

Grace’s counterclaims and defenses, finding in favor of the RA.

       From 2009 until 2012, the RA and MA pursued claims against Urban Venture

and Vulcan under the WCA and CPA for construction defects. In November 2012, the

RA, MA, Vulcan, and Urban Venture entered a settlement agreement. Urban Venture

agreed to pay the RA $26,000,000 in exchange for release of the RA’s claims against

Urban Venture. The RA received $3,120,000 to use as it deemed appropriate, with the

remaining $22,800,000 set aside for remediation. The validity and fairness of the

common expense liability and allocation in the master declaration were raised during

settlement discussions but did not become part of the 2012 settlement agreement.

D.     Current Litigation

       The plaintiffs filed this lawsuit against the various defendants in October 2015.

The original complaint sought declaratory judgment that the MA violated the

       2
         2200 Residential Association v. Grace, No. 72651-0 (Wash. Ct. App. July 25, 2016)
(unpublished).

                                                 -6-
No. 77017-9-I/7

Condominium Act and the MA declaration by “improperly and disproportionately

shift[ing] costs of 2200 Westlake onto plaintiffs and other residential owners.” The

plaintiffs alleged that: (1) the MA and RA declarations were contracts, and that the MA

and RA breached those contracts and the implied covenant of good faith and fair

dealing, (2) the MA and RA boards breached their fiduciary duties, and (3) Urban

Venture breached its fiduciary duties, and tortuously interfered with the MA and RA’s

performance of their contractual obligations under their respective declarations. The

plaintiffs made the claims on behalf of themselves, as well as derivatively on behalf of

the RA and double derivatively on behalf of the MA.

       The defendants moved for judgment on the pleadings under CR 12(c). On

February 12, 2016, the trial court dismissed the plaintiffs’ direct claims against the MA

for lack of standing, and the breach of contract claims against the RA under res

judicata, to the extent that the events occurred before December 2014 (the date of

Grace’s settlement in his prior litigation). The court also dismissed the breach of an

implied covenant of good faith and fair dealing, finding that there was no legal authority

for an implied covenant under a condominium declaration. The trial court limited the

plaintiffs’ remaining claims based on the statute of limitations, RCW 4.16.080, to the

extent they were based on events occurring more than three years before the plaintiffs

filed suit in October 2015.

       The defendants then moved for summary judgment. On September 29, 2016,

the trial court granted in part and denied in part the defendants’ motions. The court

dismissed all claims asserted by the plaintiffs derivatively on behalf of the RA and MA.

No claims remained against Urban Venture and the MA after the September 29, 2019,

                                            -7-
No. 77017-9-I/8

order. During the summary judgment hearing, the trial court expressed “real concern”

that, although the issue of the statute of limitations was not before it, any claim

challenging the common expense liability allocation under the master declaration was

likely time-barred.

       Nevertheless, in December 2016, the plaintiffs amended their complaint, adding

new claims challenging the common expense liability and adding Vulcan as a party.

The plaintiffs amended their claims against the RA to include a claim for breach of the

residential declaration arising from the RA’s entry into the November 2012 settlement

agreement. On December 20, 2016, the plaintiffs voluntarily dismissed their claims

against the RA.

       The plaintiffs were granted leave to amend their complaint twice more, in March

2017 and May 2017. The plaintiffs’ new claims alleged that: (1) Urban Venture and the

MA violated the Condominium Act, (2) Urban Venture, Vulcan, and certain MA board

members, breached duties under the Condominium Act, (3) Urban Venture and Vulcan

aided and abetted the MA’s alleged breach of duties, (4) Urban Venture violated the

CPA, and (5) Vulcan tortuously interfered with the plaintiffs’ expectancy that the MA and

RA, and respective boards, would comply with all applicable laws and duties. The

plaintiffs also sought a declaratory judgment that the 2012 settlement agreement was

“void and unenforceable as collusive, fraudulent, and against public policy” (referred to

as the “twenty first claim”). The plaintiffs named the RA as a “nominal” defendant.

       Prior to the plaintiffs’ third amended complaint, the defendants moved for

summary judgment dismissal of the plaintiffs’ remaining claims in March 2017. The

plaintiffs also moved for partial summary judgment.

                                             -8-
No. 77017-9-I/9

        In May 2017, the trial court dismissed all remaining claims on summary judgment

including the plaintiffs’ newest claims added in their third amended complaint. The court

dismissed the twenty-first claim because “there [was] no evidence of fraud, collusion or

undue influence” to create an issue of fact regarding the settlement agreement’s

validity. 3 The trial court dismissed all other claims, finding the statute of limitations

barred the plaintiffs’ claims because all challenges related to the master declaration,

which was recorded in 2006.4

        Because plaintiffs’ claims were dismissed with prejudice, the trial court concluded

that the defendants were prevailing parties. The defendants sought their attorney fees

as the prevailing party under the Condominium Act, the master declaration, and the

2012 settlement agreement. The defendants also sought their litigation costs under the

master declaration, the 2012 settlement agreement, and the Declaratory Judgment Act,

RCW 7.24.100. The trial court awarded limited fees under the 2012 settlement

agreement alone, and awarded costs under RCW 7.24.100.

        The plaintiffs appealed and the defendants cross appealed.

                                                      II.

        The plaintiffs contend that the trial court erred in its May 27, 2017, summary

judgment order by dismissing claims against the MA, Urban Ventures, and Vulcan

based on the statute of limitations. While the plaintiffs agree that the relevant statute of

        3
           Urban Venture and Vulcan, joined by the MA, argued that an alternative ground for dismissal
was that the plaintiffs’ claims were barred by the settlement agreement.
         4
           As part of its ruling, the trial court concluded that the common expense liability allocation in the
MA declaration “does not comply with RCW 64.34.224(1) because the [MA] Declaration did not state the
formula or method used to establish the allocation of common expenses due to the fact that the Declarant
did not use a formula or method to establish the allocation of common expenses.” The court rejected the
defendants’ argument that the table in exhibit B is the formula or method used to establish the percentage
allocation. Because the court dismissed the plaintiffs’ claims, we agree with the defendants that the
court’s conclusion was dicta. We will not address the merits of the court’s conclusion.

                                                     -9-
No. 77017-9-I/10

limitations is three years under RCW 4.16.080(2), they argue that a new cause accrues

every year when the MA allocates the common expenses between the units, using the

declared value in exhibit B. We disagree.

       We review summary judgment decisions de novo. Int’l Marine Underwriters v.

ABCD Marine, LLC, 179 Wash. 2d 274, 281, 313 P.3d 395 (2013). “Summary judgment is

proper only where there is no genuine issue of material fact and the moving party is

entitled to judgment as a matter of law.” Int’l Marine Underwriters, 179 Wash. 2d at 281;

CR56(c).

       RCW 4.16.080(2) states that “an action for taking, detaining, or injuring personal

property, including an action for the specific recovery thereof, or for any other injury to

the person or rights of another not hereinafter enumerated” shall be commenced within

three years. The determination of whether the statute of limitations bars a plaintiff’s

claim depends on when the plaintiff’s cause of action accrued. Haslund v. City of

Seattle, 86 Wash. 2d 607, 619, 547 P.2d 1221 (1976). 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.” Haslund, 86 Wash. 2d at 619.

       Each of the plaintiffs’ individual causes of action against the MA, Vulcan, and

Urban Ventures arises out its claim that the original master declaration, and specifically

the common element liability allocation, violate the Condominium Act, CPA, or a

statutory or common law duty.5 There is no genuine issue of fact, however, that the

       5
             These include the following cause of action: (1) violation of Condominium Act by Urban
Ventures, and the MA based on the common expense liability allocation, appointment of board members,
and design of condominium structure; (2) breach of duty against Vulcan, Urban Ventures, and the MA
arising from original condominium structure and common expense liability allocation; (3) aiding and
abetting breach of duty by Vulcan and Urban Ventures arising from original condominium structure and
common expense liability allocation; (5) breach of declaration against MA arising from common expense
liability allocation; (6) breach of CPA against Urban Ventures arising from common expense liability

                                                -10-
No. 77017-9-I/11

master declaration and common expense liability allocation in exhibit B, were created

and recorded in 2006. Nor is there a genuine issue of fact that the common expense

liability allocation was set forth in the public offering statement and governing

documents were provided to every original buyer at 2200 Westlake before they bought

their units. As such, any challenge to the common expense liability allocation accrued

at the time the residential units were sold in 2006.

        The plaintiffs argue first, without citation to authority, that a new cause of action

should accrue each year that that the MA set the budget for the following year using the

common expense liability allocation. The plaintiffs ignore, however, that the MA has no

discretion or authority to deviate from the common expense liability allocation set forth

in the original master declaration and exhibit B. The master declaration provides that

“The Association, acting by and through the Board for the benefit of the Condominium

and the Owners, shall enforce the provisions of this Declaration and of the Bylaws and

shall have all powers provided in the Act[.]” The master declaration further provides that

the owners must “comply strictly with the provisions of this Declaration, the Bylaws and

the administrative rules and regulation passed hereunder[.]” Finally, the MA is required

by both the master declaration and the Condominium Act to apply the common expense

allocation in exhibit B. “[A]ll Common Expenses must be assessed against all the Units

in accordance with the respective Allocated Interest of each Unit as set forth in Exhibit

B.” See also RCW 64.34.360(2) (“all common expenses must be assessed against all

the units in accordance with the allocations set forth in the declaration pursuant to RCW

64.34.224(1)”).

allocation; and (7) tortious interference against Vulcan arising from the original master declaration and
common expense allocation.

                                                    -11-
No. 77017-9-I/12

        Plaintiffs assert that the MA amended the master declaration in 2010 to add

section 10.4.10, which gave the MA discretion over annual common expense

allocations. Section 10.4.10, however, applies only to limited common elements, not all

of the common elements. Section 10.4.10 provides that “Any Common Expense, or

portion thereof, benefitting fewer than all of the Units may be assessed by the Board

exclusively against the Units benefitted.” See also RCW 64.34.020 (“‘Limited common

element’ means a portion of the common elements allocated by the declaration or by

operation of RCW 64.34.204(2) or (4) for the exclusive use of one or more but fewer

than all of the units”). Common expenses, and limited common expenses are different

expenses, governed by different provisions of the master declaration, and subject to

differing statutory requirements. Thus, for example, while the MA has discretion under

Section 10.4.10 to approve a limited common expense that would benefit only the retail

unit and assess that limited common expense only against the retail unit, Section

10.4.10 does not grant the MA the discretion to change the overall common expense

liability allocation set out in exhibit B. Because there is no discretion to change the

common expense liability allocation, any challenge to the original allocation accrued in

2006.

        Plaintiffs next argue that there is at least a question of genuine fact over whether

the limitations period should be tolled. This argument fails for two reasons. First,

plaintiffs cite Green v. A.P.C., 136 Wash. 2d 87, 95, 960 P.2d 912 (1998), Alexander v.

Sanford, 181 Wash. App. 135, 325 P.3d 341 (2014), and Norris v. Church & Co., Inc., 115
Wash. App. 511, 514, 63 P.3d (2002), as authority for application of the discovery rule to

their claims. These cases do not support the plaintiffs.

                                            -12-
No. 77017-9-I/13

       In Green, our Supreme Court extended the discovery rule to cover personal

injuries arising from exposure to toxic substances where there was no evidence that the

plaintiff should have known their injury existed more than three years before filing suit.

Green, 136 Wash. 2d at 100.

       Alexander, involved claims against a condominium developer and board

members of the condominium association arising from latent construction defects that

the developer and condominium board knew about but hid from unit owners until after

the statute of limitations had run. Alexander, 181 Wash. App. at 142-48. This court held

that claims for breach of board member duty of care, CPA claims, negligent

misrepresentation, and fraud by omission and misrepresentation, arising out of the

latent defects were tolled until a 2011 meeting with the unit owners where the board

declared a budget with a special assessment for the costs of the repairs. Alexander,
181 Wash. App. at 148, 168.

       Similarly, Norris involved latent construction defects in a new home. While the

homeowners learned that the home leaked shortly after moving in, it was not until four

years later that a thorough inspection revealed significant damage resulting from

defects during the original home construction. The court applied the discovery rule,

holding that the cause of action for fraudulent concealment did not accrue until the

homeowners discovered or could have discovered the latent defects. Norris, 115 Wn.

App. 516-17.

       All three of the cited cases concern latent defects or injuries—defects or injuries

that could not reasonably be discovered within the relevant statute of limitations. In

contrast, here, the claims asserted by the plaintiffs arise from the original master

                                            -13-
No. 77017-9-I/14

declaration and common expense liability calculation—neither of which were hidden.

The cases cited by plaintiffs do not support extension of the discovery rule to claims

arising from condominium formation documents and we decline to do so.6

            Second, while plaintiffs assert that the source of the “unfair” allocation was

“newly discovered evidence,” there is no dispute that the common expense liability

allocation was set forth in the public offering statement and provided to every original

buyer at 2200 Westlake before they bought their units. The master declaration,

including exhibit B, were also recorded. Recording gives constructive notice to all future

purchasers. Shephard v. Holmes, 185 Wash. App. 730, 740-41, 345 P.3d 786 (2014)

(citing Strong v. Clark, 56 Wash. 2d 230, 232-33, 352 P.2d 183 (1960)).7

        Because the statute of limitations accrued in 2006 with the recording of the

master declaration and exhibit B, the trial court did not err in dismissing the plaintiffs’

claims against the MA, Vulcan, and Urban Ventures arising out of the master

declaration.8

                                                     III.

        The plaintiffs next argue that the trial court erred in its September 29, 2015, order

on summary judgment, when it dismissed their derivative claims brought on behalf of

        6
           While, as discussed below, a condominium declaration is not a contract, the plaintiffs’ claims
sound more in contract than construction defects or personal injury. Our Supreme Court has made clear
that a breach of contract claim accrues on the date of the breach, not discovery of the breach. 1000
Virginia Ltd P’ship v. Vertecs, 158 Wash. 2d 566, 576-78, 146 P.3d 423 (2006).
         7
           Further, it is undisputed that at least Grace knew the basic facts of his claims. In October 2008,
Grace complained about the governance structure and common expense allocation to other owners,
arguing, “We are literally losing money to Vulcan from Master dues[.]” In the same email, Grace
acknowledged that time for taking legal action to advance these concerns was limited, warning that “[t]ime
(statute of limitations, money being lost, political inertia, falsified and missing records) is against us.”
         8
           The plaintiffs also challenge the trial court’s order dismissing their individual claims against the
MA based on lack of standing. Because we hold that the plaintiffs’ claims against the MA are barred by
the statute of limitations, we do not reach their standing argument.

                                                     -14-
No. 77017-9-I/15

the RA and MA. The plaintiffs contend that the trial court erred as a matter of law in

concluding that individual condominium association members do not have derivative

standing. We disagree.

       The parties do not dispute that both the MA and RA were incorporated under the

Washington Nonprofit Corporation Act (WNCA), chapter 24.03 RCW. The WNCA was

enacted in 1967. See Laws of 1967, ch. 235. The WNCA governs all aspects of

nonprofit corporations, including incorporation, permissible purposes, and dissolution.

See, e.g., RCW 24.03.015, .020, .025, .220-276. Nonprofit corporations are managed

by an elected or appointed board of directors according to the corporation’s articles of

incorporation or bylaws. RCW 24.03.095 - .100. In contrast to for-profit corporations,

which are organized under the Washington Business Corporation Act (WBCA), chapter

23B.01 RCW, nonprofit corporations do not have shareholders, but instead may “have

one or more classes of members or may have no members.” RCW 24.03.065(1);

compare RCW 23B.01.400(34).

       The WBCA expressly authorizes shareholders of for-profit corporations to bring

derivative actions on behalf of the corporation. RCW 23B.07.400. “In a derivative suit,

a stockholder asserts rights or remedies belonging to the corporation for the

corporation’s benefit.” Haberman v. Washington Pub. Power Supply Sys., 109 Wash. 2d
107, 147, 744 P.2d 1032 (1987). The WNCA, in contrast, does not authorize members

to bring derivative actions on behalf of the nonprofit corporation against third parties.

Instead, the WNCA provides only two circumstances where a member may seek judicial

relief on behalf of the nonprofit corporation: (1) a “representative suit” against an officer

or director exceeding their authority, or (2) in order to seek dissolution of the nonprofit

                                             -15-
No. 77017-9-I/16

where the directors have acted “in a manner that is illegal, oppressive, or fraudulent” or

“where assets are being misapplied or wasted.” RCW 24.03.040, .266(1).

       Relying on the “plain and unambiguous” language of the WNCA, as well as its

legislative history, the court rejected the plaintiffs’ argument that nonprofit members

have an equitable common law right to bring derivative actions in Lundberg ex rel.

Orient Found. v. Coleman, 115 Wash. App. 172, 176, 60 P.3d 595 (2002). In Lundberg, a

director attempted to bring a derivative action on behalf of a nonprofit corporation

against other directors, alleging that they had breached their fiduciary duties. 115 Wn.

App. at 176. This court held that the legislature intended to limit derivative lawsuits to

the narrow circumstances addressed in the statute, reasoning it “carefully delineates

when actions may be brought on behalf of the corporation.” Lundberg, 115 Wash. App. at

177 (citing RCW 24.03.040 and former RCW 24.03.265).

       Under Lundberg, plaintiffs do not have a right to bring a derivative action on

behalf of the nonprofit RA or MA. Their efforts to distinguish Lundberg are not

persuasive. The trial court did not err when it dismissed the plaintiffs’ derivative claims

brought on behalf of the RA and MA.

                                             IV.

       The plaintiffs next challenge the trial court’s decision in its February 12, 2016,

order on the defendants’ motion for judgment on the pleadings, concluding the plaintiffs’

breach of contract claims against the RA were barred by res judicata. The trial court’s

decision was based on the prior litigation between Grace and the RA. While we agree

that, based on the pleadings before the trial court, it appears Mohandessi’s individual

                                            -16-
No. 77017-9-I/17

claims would not be barred by res judicata, we need not reach this issue because the

plaintiffs’ complaint failed to state a cause of action for breach of contract.

       We review a CR 12(c) motion for judgment on the pleadings de novo. M.H. v.

Corp. of Catholic Archbishop of Seattle, 162 Wash. App. 183, 189, 252 P.3d 914 (2011).

A dismissal under CR 12(c) is appropriate only if “it appears beyond doubt that the

plaintiff can prove no set of facts, consistent with the complaint, which would entitle the

plaintiff to relief.” Haberman, 109 Wash. 2d at 120 (internal quotation marks omitted).

       The plaintiffs’ original complaint alleged two claims against the RA: (1) breach of

contract based on the assertion that the master and residential declarations were

contracts and (2) breach of implied covenant of good faith and fair dealing again based

on the assertion that the master and residential declarations were contracts. These

claims fail as a matter of law.

       “A contract is a promise or set of promises for the breach of which gives a

remedy, or the performance of which the law in some way recognizes as a duty.”

Restatement (Second) of Contracts § 1 (1981); accord Washington Fed’n of State

Emps., AFL-CIO, Council 28, AFSCME v. State, 101 Wash. 2d 536, 549, 682 P.2d 869

(1984). In contrast, condominium declarations are not promises between parties, but

are recorded real property instruments. Bellevue Pac. Ctr. Condo. Owners Ass’n v.

Bellevue Pac. Tower Condo Ass’n, 124 Wash. App. 178, 188, 100 P.3d 832 (2004).

Condominium owners are not bound to declarations under the same rules as parties to

a contract. Rather, owners have the power to amend a declaration by vote. See RCW

64.32.090(13); RCW 64.34.264(1). Here, the residential declaration may be amended

by consent of more than 67 percent of the owners.

                                             -17-
No. 77017-9-I/18

        Because the plaintiffs failed to allege a cause of action supporting a breach of

contract claim against the RA, dismissal of the plaintiffs’ breach of contract claims was

appropriate.9

                                                   V.

        The plaintiffs next contend that the trial court erred when it dismissed their

twenty-first claim: that the 2012 settlement agreement was void as the product of fraud

and collusion. The plaintiffs argue that the trial court dismissed their claim sua sponte.

We disagree.

        On March 17, 2017, the remaining defendants moved for summary dismissal of

all the plaintiffs’ remaining claims. Vulcan and Urban Venture argued, among other

things, that the 2012 settlement agreement barred the plaintiffs’ claims. Before the

plaintiffs responded to the motions for summary judgment they sought leave to amend

their complaint to add their twenty-first claim: that the 2012 settlement agreement was

void as collusive, fraudulent, and against public policy. In support of their motion,

plaintiff submitted argument and multiple exhibits in support of the twenty-first claim.

The plaintiffs then argued in response to the motions for summary judgment that the

2012 settlement agreement was void as the product of fraud and collusion.

        By the time of the summary judgment hearing, the trial court had granted leave to

amend, and the plaintiffs had filed their third amended complaint. During argument

Urban Venture and Vulcan confirmed that they were seeking dismissal of all claims,

         9
           The plaintiffs subsequently amended their complaint to add claims against the RA for breach of
the residential declaration arising from the RA’s entry into the November 2012 settlement agreement. On
December 20, 2016, the plaintiffs voluntarily dismissed their claims against the RA. Thus, as of
December 20, 2016, there were no claims remaining against the RA.

                                                  -18-
No. 77017-9-I/19

including specifically the twenty-first claim based on the briefing submitted. The

plaintiffs did not object that the issue had not been properly raised or adequately

briefed. The plaintiffs instead argued the merits of their claim.

       Because the plaintiffs did not object to the trial court deciding the twenty-first

claim, the plaintiffs’ argument that the dismissal was sua sponte fails. The plaintiffs

have not explained how the twenty first claim can survive a motion for summary

judgment and therefore have waived this argument on appeal.

                                             VI.

       All parties appeal the trial court’s award of attorney fees and costs. The plaintiffs

challenge the court’s award of attorney fees under the 2012 settlement agreement. The

defendants cross appeal and challenge the trial court’s decision to reduce their attorney

fees to the portion spent defending the 2012 settlement agreement. The defendants

further challenge the trial court’s failure to award attorney fees under Condominium Act.

We affirm the trial court’s award of fees under the 2012 settlement agreement to Urban

Venture, Vulcan, and the RA.

       In Washington, attorney fees may be awarded when authorized by a contract, a

statute, or a recognized ground in equity. Fisher Props., Inc. v. Arden-Mayfair, Inc., 106
Wash. 2d 826, 849-50, 726 P.2d 8 (1986). Whether a contract or law authorizes an

attorney fee award is question of law and reviewed de novo. Kaintz v. PLG, Inc., 147
Wash. App. 782, 786, 197 P.3d 710 (2008). Whether the amount of fees awarded was

reasonable is reviewed for abuse of discretion. Ethridge v. Hwang, 105 Wash. App. 447,

460, 20 P.3d 958 (2001). We review the trial court’s interpretation of statutory costs

                                             -19-
No. 77017-9-I/20

provisions de novo. McConnell v. Mothers Work, Inc., 131 Wash. App. 525, 532, 128 P.3d
128 (2006).

                                              A.

       The 2012 settlement agreement provides for prevailing party fees “arising from

the need to take action to enforce this Agreement, including mediation, arbitration, or

litigation.” The trial court awarded defendants their attorney fees “they needed to incur

to take action to enforce the Settlement Agreement.”

       The plaintiffs contend that the RA owners are not bound by the terms of the 2012

settlement agreement for several reasons. The plaintiffs contend, “the residents were

not involved in negotiations, nor were they represented by counsel.” And further, the

RA owners “never voted on, let alone approved, the terms of the settlement agreement;

the [RA owners] did not sign the settlement agreement; [RA owners] were not told that

the settlement agreement could impact their personal rights or liabilities; and residents

were not told that a settlement had been reached until after the agreement had been

executed.”

       The plaintiffs’ argument fails because RCW 64.34.304 provides unit owners’

associations with the power to “institute, defend, or intervene in litigation or

administrative proceedings in its own name on behalf of itself or two or more unit

owners on matters affecting the condominium” and “make contracts and incur liabilities.”

RCW 64.34.304(1)(d), (e). The residential declaration provides the same owners

association powers. In the 2012 settlement agreement, RA means “any officer, director,

manager, member, unit owner, principal, partner, predecessor, successor, agent,

                                             -20-
No. 77017-9-I/21

shareholder, and/or employee.” Thus, the 2012 settlement agreement intended to bind

RA members.

      Our Supreme Court has recognized that in a condominium “each owner, in

exchange for the benefits of association with other owners, must give up a certain

degree of freedom of choice which he [or she] might otherwise enjoy in separate,

privately owned property.” Lake, 169 Wash. 2d at 535 (citation and internal quotation

marks omitted). Thus, the RA had the authority to enter and bind the RA owners

because they agreed to give up certain freedoms, such as being signatories on a

settlement agreement where the RA settled construction defects on behalf of the

association and the RA owners. The plaintiffs have not cited any part of the residential

declaration that requires the RA owners to vote before the RA enters a settlement

agreement for construction defects, thus their argument that the RA owners are not

bound because they did not vote fails.

      The trial court did not err in awarding the defendants attorney fees under the

2012 settlement agreement.

                                           B.

      While the trial court awarded the defendants their attorney fees under the 2012

settlement agreement, it limited its award to time spent defending against the claim that

the 2012 settlement agreement was void.

      The RA originally requested attorney fees of $380,862.50 for its entire defense.

The trial court subsequently granted the RA’s reduced fee request of $74,245.00 for its

work defending the 2012 settlement agreement. The court also granted the MA’s

                                          -21-
No. 77017-9-I/22

reduced fee request, awarding $49,521. The trial court rejected Urban Venture and

Vulcan’s reduced fee request of $813,605 and reduced it further to $299,198.

      The defendants argue that the trial court erred because all of the plaintiffs’ the

claims involved a common core of facts or legal theories. The trial court carefully

considered this claim below explaining:

              Plaintiffs brought a total of 21 claims, of which thirteen made no
      reference to the Settlement Agreement and sought no relief that would
      appear to require any of the defendants to incur fees arising from the need
      to enforce that agreement. Plaintiffs brought their first, second, third, fifth,
      seventh, eighth, twelfth, fourteenth, fifteenth, sixteenth, nineteenth, and
      twentieth claims individually and/or derivatively against various defendants
      for allegedly violating the Washington Condominium Act by failing to state
      the formulas and methods used to establish the “Declared Value” on
      which they allegedly based the allocation of common expenses, by
      oppressing RA and its owners, by aiding and abetting those actions, by
      breaching the Declaration, and by tortious interference. Plaintiffs’
      eighteenth claim sought an accounting, derivatively, on behalf of the RA
      against the MA. Those claims did not involve a common core of facts or
      are based on related legal theories arising from defendants’ need to
      enforce the Settlement Agreement. Defendants are not entitled to an
      award of fees incurred in defense of those claims and must segregate
      those fees.

              Plaintiff’s fourth, ninth, tenth, and seventeenth claims mentioned
      the Settlement Agreement. The first of those claimed breach of the
      Residential Declaration and Governing Documents by, among other
      things, failing to reach an adequate settlement for construction defects in
      the 2200 Condominium. Plaintiffs’ ninth and seventeenth claims for unjust
      enrichment were against UV individually and Vulcan derivatively,
      respectively. Those claims related to UV and/or Vulcan’s alleged receipt
      of benefits that should have flowed to residents, which allegedly included
      improper settlement proceeds, among others. Plaintiffs brought their tenth
      claim for violation of the Washington Condominium Act and Governing
      Documents derivatively on behalf of RA against UV and MA and
      derivatively on behalf of MA against UV. Plaintiffs primarily based this
      claim on the misallocation of common expenses and the appointment of
      conflicted board members, but that claim included a reference to the
      settlement of construction defect claims. Notably, none of those claims
      sought recession or otherwise indicated that the Settlement Agreement
      should not be enforced. But to the extent defendants can show that they
      incurred fees arising from the need to enforce the Settlement Agreement

                                           -22-
No. 77017-9-I/23

      in relation to those claims and they segregate those fees, they would be
      entitled to such an award.

      Plaintiffs’ twenty-first claim is the one claim that truly appears aimed at the
      enforceability of the Settlement Agreement. In that claim, plaintiffs
      contend that the Settlement is void, collusive, fraudulent, and against
      public policy. This claim also relates to plaintiffs’ sixth prayer for relief that
      seeks a judgment declaring that agreement unenforceable (the other eight
      prayers for relief do not mention the Settlement Agreement). Defendants
      are entitled to those fees incurred in relation to this claim so long as they
      segregate them from those they did not incur arising from the need to
      enforce the Settlement Agreement.

      We cannot conclude that the trial court abused its discretion in limiting the fees it

awarded under the 2012 settlement agreement.

                                             C.

      The defendants next challenge the trial court’s decision to not award attorney

fees under the Condominium Act. The Condominium Act provides that “the court, in an

appropriate case, may award reasonable attorney’s fees to the prevailing party.” RCW

64.34.455. The trial court denied the defendants’ claim for attorney fees under the

Condominium Act and denied their motions for reconsideration.

      As the trial court explained in denying Urban Venture and Vulcan’s motion for

reconsideration:

      This Court held that UV and Vulcan were prevailing parties, but this Court
      did not believe this was an appropriate case to award their attorney’s fees
      for the reasons stated on the record at the September 12, 2017 hearing.
      UV and Vulcan rely on Bilanko v. Barclay, [185 Wash. 2d 443, 375 P.3d 591
      (2016)] Defendants contend this Court erred in reaching the latter
      conclusion. They argue that Bilanko is “factually indistinguishable” from
      this case, apparently because the Supreme Court affirmed the dismissal
      of the plaintiff’s claims on statute of limitations grounds and noted that the
      plaintiff could have moved.

              Despite those two similarities, Bilanko is dissimilar from this case in
      several critical respects that UV and Vulcan do not acknowledge.9 Here,
      plaintiffs brought their claims not to enrich themselves but to derivatively

                                             -23-
No. 77017-9-I/24

       benefit the 2200 Residential Association (RA) and directly benefit their
       fellow condo owners. They brought those claims as consumers to
       address what they perceived to be the unfair imposition of costs on RA by
       the [MA], Urban Venture LLC, and Vulcan Inc. Notably, this Court found
       merit to that claim and a violation by defendants of the Washington
       Condominium Act: the Declared Values that the Declaration used to
       apportion those costs were simply made-up values rather than being
       based on a method or formula that is capable of calculation. Further,
       while the defendants make much of this Court’s reference to the “scorched
       earth” litigation in this case, this Court noted that both sides were to
       blame. Indeed, plaintiffs’ opposition to defendants’ motions for
       reconsideration sets forth many examples of defendants’ own role in
       driving up the costs of this litigation.
       ___________________________________________________________
               9 Even if Bilanko was indistinguishable in all respects with this case, and it is
       plainly not, the Washington Supreme Court merely exercised its discretion to award fees
       in that case. Nowhere in that decision did the Washington Supreme Court hold that it
       would have been an abuse of discretion for a court to not award fees when faced with
       those facts.

Similarly, as the trial court explained in denying the RA’s motion for reconsideration:

              RA contends this Court erred primarily by applying to RA its
       rationale for not awarding fees to [MA], and Vulcan and Urban Venture,
       LLC. . . . In its oral ruling this Court did emphasize that plaintiffs, in their
       role as consumers and on behalf of similarly situated residents, brought
       consumer protection claims of self-dealing and illegal control against the
       defendants. RA fails to acknowledge the reason why plaintiffs had to
       occupy those roles: RA failed to take any action to address the fact that
       the Declared Valued in the Declaration were based on made-up values
       rather than being based on a method or formula that is capable of
       calculation. Further, RA joined forces with the other defendants to actively
       oppose plaintiffs’ claims at every turn. Finally, while RA makes much of
       this Court’s reference to the “scorched earth” litigation in this case, this
       Court notes that RA shared much of the blame. Indeed, plaintiffs’
       opposition to the [defendant] motion for reconsideration sets forth many
       examples of defendants’ own role in driving up the costs of this litigation.

       We agree with the trial court. An award of attorney fees under RCW 64.34.455 is

discretionary. We cannot conclude that the trial court abused its discretion in denying to

award attorney fees under the Condominium Act.

       We affirm the trial court’s denial of attorney fees under the Condominium Act.

                                                 -24-
No. 77017-9-I/25

                                             VII.

       The plaintiffs finally argue that the trial court erred by awarding costs for

“mediator fees, meals, travel, expert fees, consultant fees, or document review

expenses” under the Declaratory Judgment Act, RCW 7.24.100. The plaintiffs contend

that “costs” should have been limited to costs allowed under RCW 4.84.010. We

disagree.

       We review questions of statutory interpretation de novo. State v. Dennis, 191
Wash. 2d 169, 172, 421 P.3d 944 (2018). If a statute’s meaning is plain on its face, then

the court must give effect to the plain meaning as an expression of legislative intent.

Dep’t of Ecology v. Campbell & Gwinn, LLC, 146 Wash. 2d 1, 9-10, 43 P.3d 4 (2002).

       RCW 7.24.100 provides “In any proceeding under this chapter, the court may

make such award of costs as may seem equitable and just.” RCW 7.24.100 “gives the

court broader discretion with regard to costs than courts have in other kinds of

proceedings.” 15 DOUGLAS J. ENDE, WASHINGTON PRACTICE: CIVIL PROCEDURE § 42.24

(3d ed. 2018). The legislature’s use of the word “may” confers discretion. Strenge v.

Clarke, 89 Wash. 2d 23, 28, 569 P.2d 60 (1977). Empowering a court to do what is

“equitable” and “just” also indicated broad discretion. Farmer v. Farmer, 172 Wash. 2d
616, 624, 259 P.3d 256 (2011). Nothing in the statute limits a court’s discretion.

       The trial court did not abuse its discretion in awarding costs under RCW

7.24.100.

                                            VIII.

       All parties request attorney fees on appeal. Under RAP 18.1, we may grant

attorney fees “if applicable law grants to a party the right to recover reasonable attorney

                                            -25-
No. 77017-9-I/26

fees or expenses on review.” As discussed above, the Condominium Act grants

discretion for the court “in an appropriate case,” to award reasonable attorney fees to

the prevailing party. RCW 64.34.455. Here, the MA, RA, Urban Venture, and Vulcan

are the prevailing parties, subject to compliance with RAP 18.1 we award their attorney

fees on appeal.

      Affirmed.

WE CONCUR:

                                                  __________________________________

                                           -26-