Opinion
No. 56023-9-I.
November 6, 2006.
Appeal from a judgment of the Superior Court for King County, No. 04-2-09756-8, Mary E. Roberts, J., entered March 11, 2005.
Counsel for Appellant(s), Edward Paul Weigelt Jr., Attorney at Law, Po Box 2299, Lynnwood, WA 98036-2299.
Counsel for Respondent(s), Claudia Kilbreath, Short Cressman Burgess PLLC, 999 3rd Ave Ste 3000, Seattle, WA 98104-4088.
Alex J Rose, Attorney at Law, 15834 Se 49th St, Bellevue, WA 98006-3278.
Tatyana A Gidirimski, Attorney at Law, 999 3rd Ave Ste 3000, Seattle, WA 98104-4043.
Counsel for Respondent/Cross-Appellant, Leslie O'bryant (Appearing Pro Se), 1420 Nw Gilman Blvd, #2593, Issaquah, WA 98047.
Affirmed by unpublished opinion per Coleman, J., concurred in by Schindler, A.C.J., and Grosse, J.
Accredited Surety appeals and Leslie O'Bryant cross-appeals the trial court's findings of fact, conclusions of law, order granting consolidated defendants' motion for judgment, and its order denying Accredited's motion for order to show cause vacating judgment. We affirm the trial court and conclude:
(1) The temporary restraining order (TRO) in this case was properly dissolved because the plaintiffs below did not establish a clear legal or equitable right to a TRO;
(2) The trial court did not err in concluding that the TRO was wrongful because after it considered the merits of the TRO, it determined that it would not have been ordered if the commissioner had known that plaintiffs did not have a clear legal right to injunctive relief;
(3) The trial court did not abuse its discretion in awarding a total of $22,550.52 in attorney fees because this amount was for resisting the TRO and motion for preliminary injunction — not for work done on withdrawn claims — and the entire amount was supported by substantial evidence;
(4) The trial court did not err in awarding respondents an additional $11,011.80 in attorney fees because the language of the bond is broad enough to encompass attorney fees and costs incurred resisting Accredited's attempts to avoid liability on the bond after the TRO was ruled to be wrongfully issued. Case law allows parties to recover under a bond for any damages caused by a wrongfully issued injunction or TRO;
(5) Accredited's motion to vacate was properly denied because it received sufficient notice of respondent's intention to make a claim on the bond, there was no misrepresentation that prevented it from fully and fairly presenting its case or defense, and it has not shown extraordinary circumstances that entitle it to relief;
(6) The court did not violate the automatic stay because appellant O'Bryant's bankruptcy case was dismissed by the time a motion for entry of judgment was filed and a judgment was entered against her; and
(7) Respondents are entitled to attorney fees and costs on appeal based on RAP 18.1(a), the language of the bond, and case law.
FACTS
Actuarial Planning Group, Inc. (APG) was an administrator of retirement plans. James M. Berry was its president. In September 2003, Advance Capital, Inc., made a loan to APG and took a security interest in APG's client files and other property. By December 2003, APG was in default on its loan from Advance. On March 22, 2004, APG's office learned that Berry had committed suicide. On April 1, 2004, Advance took possession of APG's client files and other property. Advance transferred the client files to a warehouse.
Within two weeks of Berry's suicide, Leslie O'Bryant, Berry's widow, and a group of former APG employees each set up rival retirement plan administration companies. O'Bryant formed New Solutions Retirement Planning Services, Inc., and APG's ex-employees formed Northwest Retirement Planning Services, Inc. Both companies sought to obtain APG's former clients as their own. New Solutions sent a letter to APG's former clients, stating that it had taken over APG's client base and that all payments were to be made to New Solutions. Meanwhile, Northwest Retirement arranged with Advance to pay off APG's remaining debt in exchange for APG's client files and other property. Advance and Northwest Retirement came to an agreement. On April 8, Northwest Retirement employees picked up the APG client files from the warehouse.
On April 27, 2004, APG, O'Bryant, and Berry's estate (plaintiffs) filed a complaint, a motion for a TRO, and a motion for preliminary injunction against Northwest Retirement, its officers, Advance, and its president (defendants). Plaintiffs did not give notice to defendants of its motion for a TRO. The TRO prohibited the defendants from using the APG client files or contacting APG's former clients. It also required the defendants to return the client files to APG. As a condition of the TRO, plaintiffs posted a security bond of $80,000 for "payment of costs and damages that might be incurred by any party found to be wrongfully restrained or enjoined by this order." The bond was posted on April 30, 2004. Accredited Surety and Casualty Co, Inc., the appellant in this appeal, was named as the surety for the bond.
On May 19, 2004, a hearing was held on the TRO and the motion for preliminary injunction. Judge Mary Roberts dissolved the TRO and denied the motion for a preliminary injunction because APG had not established a clear legal right to the files and had not demonstrated that there was an emergency requiring a TRO.
On June 10, 2004, defendants Northwest Retirement and its officers sent a letter to Judge Roberts and John Hanley, Accredited's attorney in fact, informing them of their intention to make a claim upon the $80,000 bond. On August 13, defendants filed a motion for an award of attorney fees and costs in dissolving the TRO and the consequential damages suffered as a result of the TRO. Defendants did not serve the motion on Accredited, who at this time was not a party in the underlying action. On August 26, the motion was stayed because O'Bryant filed for bankruptcy. On August 30, counsel for plaintiffs filed a response to the motion on behalf of plaintiffs and Accredited. None of the defendants were served with the response. The response argued that action against Accredited was premature because judgment had not been entered against O'Bryant. The response also noted that Accredited was not served with defendants' motion for an award of attorney fees and costs.
On November 3, 2004, the bankruptcy court granted a relief from stay to allow defendants to obtain judgment on the bond. Defendants sent a letter to the court stating that the stay had been lifted and requesting a ruling on the motion for attorney fees, costs, and consequential damages. The letter was also sent to plaintiff's counsel and Accredited. On November 16, Judge Roberts granted the defendants' motion for attorney fees of $22,550.54. On November 29, plaintiffs filed a motion to vacate the November 16 order of an award of attorney fees. On December 13, the court denied the motion to vacate.
On December 1, the bankruptcy court dismissed O'Bryant's case.
On December 27, 2004, defendants filed a motion for entry of judgment on the bond. This motion included a claim for an additional $11,011.80 for attorney fees and costs incurred preparing the motion and resisting Accredited's November 29, 2004 motion to vacate. Defendants served Accredited with the motion. On December 28, Accredited filed a special notice of appearance in the lawsuit. On January 3, 2005, Accredited filed a response to the defendant's motion for entry of judgment, a motion to intervene, and a motion for order to show cause vacating judgment.
Accredited repeatedly argued that defendants needed to file a claim form. In response, defendants filed a claim with Accredited and agreed to continue the hearing dates for its motion for entry of judgment and Accredited's motion for order to show cause to March 6, 2005. By February 1, 2005, Accredited stated that it had all the information it needed to process the claim on the bond and that it would make a decision the next week. By March 3, 2005, Accredited had not made a decision on the bond claim.
On March 11, 2005, the court granted the defendants' motion for entry of judgment. The order granting entry of judgment awarded defendants $33,562.34 in attorney fees and costs and entered findings of fact and conclusions of law supporting the award. On the same day, the court denied Accredited's motion for order to show cause vacating judgment. Accredited appeals for the reasons stated below. Leslie O'Bryant cross-appeals for the same reasons as Accredited and, in addition, argues that the judgment entered against her violated the bankruptcy court's automatic stay.
ANALYSIS Dissolution of TRO
Accredited argues that the TRO should not have been dissolved. We conclude the TRO was properly dissolved because the plaintiffs below did not establish a clear legal or equitable right to the TRO.
In order to obtain a preliminary injunction or TRO, the moving party must show: (1) a clear legal or equitable right; (2) a well-grounded fear of immediate invasion of that right; and (3) that threats complained of are either resulting in or will result in actual and substantial injury. Federal Way Family Physicians, Inc. v. Tacoma Stands Up for Life, 106 Wn.2d 261, 265, 721 P.2d 946 (1986). The trial court's findings of fact are reviewed under a substantial evidence standard, and its conclusions of law are reviewed de novo.
The court dissolved the TRO because it found that APG had not established a clear legal right to the client files and did not have a well-grounded fear of an immediate invasion of that right. The trial court properly dissolved the TRO. It was unclear what right APG had to the client files because Advance had already lawfully taken possession of them pursuant to its security agreement. APG's right to the client files was also unclear because it seemingly ceased operations when O'Bryant sent letters directing its clients to make all payments to New Solutions instead of APG.
Wrongfulness of TRO
For an injunction to be wrongful, the trial court must conclude on the merits of the case that the restraint was erroneous in the sense that it would not have been ordered had the court been presented all the facts. Knappett v. Locke, 92 Wn.2d 643, 647, 600 P.2d 1257 (1979). Here, the TRO was initially granted after a hearing in which a commissioner heard only from the plaintiffs. The defendants were not notified of the proceedings. The TRO was dissolved after a hearing in which the court considered declarations submitted by the parties and heard arguments from attorneys for both sides. The court dissolved the TRO because it found that the plaintiffs had not established a clear legal right to APG's files. The court specifically concluded that, "Plaintiff's ex parte Temporary Restraining Order was wrongfully issued." The trial court did not err in concluding that the TRO was wrongfully issued because after it considered the merits of the TRO, it correctly concluded that it would not have been ordered if the commissioner had known that plaintiffs did not have a clear legal right to injunctive relief.
Attorney Fees Award of $22,550.52
Accredited appeals the trial court's March 11, 2005 award of $22,550.52 in attorney fees to respondents. Accredited argues that the court erred in awarding a total of $22,550.54 in attorney fees for work done resisting the TRO because an estimated $5,150.00 of the $22,550.54 was for bringing a motion for judgment that included claims that were later withdrawn. Accredited also argues that the court erred in awarding $22,550.54 in attorney fees because this entire amount was not supported by substantial evidence. We conclude that the court did not abuse its discretion in awarding a total of $22,550.52 in attorney fees because (1) the attorney fees award was for work done resisting the TRO and motion for preliminary injunction, not for making a claim for lost profits and (2) the entire $22,550.52 award was supported by substantial evidence.
Attorney fees may be awarded to a party who prevails in dissolving a wrongfully issued injunction or temporary restraining order. Cecil v. Dominy, 69 Wn.2d 289, 292, 418 P.2d 233 (1966). The standard of review for an award of attorney fees is abuse of discretion. Steele v. Lundgren, 96 Wn. App. 773, 780, 982 P.2d 619 (1999). Generally, a trial court's award of fees will not be reversed absent a manifest abuse of discretion. Lundgren, 96 Wn. App. 780.
In respondent's August 13, 2004 motion for judgment on the bond, it stated that it had incurred $17,400.54 in attorney fees and costs in dissolving the TRO, not including fees for preparing and defending the motion for judgment itself. This $17,400.54 figure was supported by declarations of counsel and detailed billing records. Respondent also estimated it would incur an additional $5,150 in attorney fees and costs in preparing and defending its motion for judgment. It supported this estimate with a declaration of one of its attorneys, Alex J. Rose. Respondent's motion for judgment also included a claim for lost profits. Respondent later withdrew this claim, leaving only the request for attorney fees and costs. The trial court accepted respondent's calculation of attorney fees and costs spent dissolving the TRO (the $17,400.54 figure) and its estimate of additional attorney fees and costs in preparing and defending its motion for judgment (the additional $5,150). In its findings of fact, the court stated, "NWRPS [Northwest Retirement Planning Services, Inc.] incurred $22,550.54 in attorney fees and costs in resisting the TRO and motion for preliminary injunction."
The court did not abuse its discretion in awarding a total of $22,550.52 in attorney fees because, contrary to Accredited's assertion, this amount was for resisting the TRO and motion for preliminary injunction, not for making a claim for lost profits. The plaintiffs withdrew their claim for lost profits and stipulated that the only issue before the court was the request for attorney fees and costs. In fact, the court stated in its findings of fact that it was awarding $22,550.54 in attorney fees and costs for work done resisting the TRO and motion for preliminary injunction, not for work done on withdrawn claims.
We also conclude that the court did not abuse its discretion in awarding $22,550.54 because this amount was supported by substantial evidence. The first $17,400.54 in attorney fees and costs was supported by declarations of counsel and detailed billing records. The additional $5,150 was supported by the declaration of Alex J. Rose. Accredited does not challenge the accuracy of the declaration, which stated the type of work to be performed (preparing motion for judgment, reviewing plaintiffs' response, preparing a reply brief), the category of attorney to perform the work, and an estimate of fees and costs to be incurred. Reasonable documentation of work performed "need not be exhaustive or in minute detail." Bowers v. Transamerica Title Ins. Co., 100 Wn.2d 581, 597, 675 P.2d 193 (1983). Here, the evidence supported the entire award of $22,550.54.
Attorney Fees Award of $11,011.80
Accredited argues the trial court erred in its conclusions of law 16 and 17:
16. NWRPS are further entitled to an award of their reasonable attorney fees and costs, in the amount of $11,011.80, incurred in resisting Plaintiff's Motion to Vacate And, In The Alternative, to Reconsider Judgment and in the bringing the Motion for Entry of Judgment. NWRPS presented adequate documentation and evidence showing that these attorney fees and costs were reasonable.
17. The fees set forth in paragraphs 15 and 16 are damages sustained by NWRPS in consequence of the improperly obtained temporary restraining order. The broad language of the Bond authorizes an award of these fees and costs.
Respondents requested an additional $11,011.80 in attorney fees and costs in its December 27, 2004 motion for entry of judgment. The $11,011.80 was incurred by respondents after the TRO was dissolved. Accredited argues that respondent cannot be awarded attorney fees and costs for work done after the TRO was dissolved. We conclude that the trial court did not err in awarding respondents an additional $11,011.80 because the language of the bond is broad enough to encompass attorney fees and costs incurred resisting Accredited's attempts to avoid liability on the bond after the TRO was ruled to be wrongfully issued. Additionally, case law allows parties to recover under a bond for any damages caused by a wrongfully issued injunction or TRO.
Under the language of its bond, Accredited is liable for "all costs and damages that [respondents] may sustain in consequence of" an improperly obtained temporary injunction. The court concluded that under this language, the attorney fees incurred in resisting Accredited's motion to vacate and, in the alternative, to reconsider judgment and in bringing its own motion for entry of judgment were in consequence of the improperly obtained TRO. The court did not abuse its discretion in entering this conclusion because this work was directly in response to Accredited's efforts to avoid liability on the bond for the wrongfully issued TRO.
Case law allows parties to recover reasonable fees under a bond for any damages caused by a wrongfully issued injunction or TRO. In Knappett, the court stated that a party that has successfully dissolved an injunction may recover reimbursement for any damages caused by a temporary injunction if the injunction was granted upon a mere prima facie showing. Knappett, 92 Wn.2d at 647. The Knappett court also stated that this liability was based on the bond. Knappett, 92 Wn.2d at 647. Here, the plaintiffs below obtained a TRO based on a mere prima facie showing, and thus, respondents are entitled to reimbursement for any damages caused by the TRO. As in Knappett, the court's award of attorney fees and costs for work done resisting Accredited's efforts to avoid liability for the wrongfully issued TRO was based on the language of the bond.
Accredited cites two cases for the proposition that awards of attorney fees in dissolving a TRO are limited to those incurred after the TRO was issued through the date the TRO is dissolved: Ritchie v. Markley, 23 Wn. App. 569, 597 P.2d 449 (1979); and Parsons Supply, Inc. v. Smith, 22 Wn. App. 520, 591 P.2d 821 (1979). Both cases are distinguishable because they concern the court's equitable power to award attorney fees to a party for dissolving a wrongfully issued TRO. In neither case is a bond mentioned in connection with the TRO. These cases are inapplicable because they do not involve awards of attorney fees based on the language of a bond.
Accredited also cites cases where attorney fees were awarded under a bond, but only for work done up to the dissolution of the TRO: Ino Ino, Inc. v. City of Bellevue, 132 Wn.2d 103, 937 P.2d 154 (1997); Cheney v. City of Mountlake Terrace, 20 Wn. App. 854, 583 P.2d (1978). Ino Ino is distinguishable because in that case, the City was seeking attorney fees for work done in excess of the $5,000 bond. Ino Ino, 132 Wn.2d at 143-45. Here, the respondent is seeking attorney fees for less than the amount of the $80,000 bond. Cheney is distinguishable because in that case the court declined to award attorney fees for work done on a totally separate lawsuit where the primary relief sought was not injunctive in nature. Cheney, 20 Wn. App at 863-64. Here, the entire award of attorney fees was for work done concerning the TRO and Accredited's liability on the bond.
Motion to Vacate
Accredited contends that the trial court erred in denying its motion to vacate the March 11, 2005 order granting judgment. Specifically, Accredited argues that under CR 60(b)(1) and (5), the court should have vacated the order granting judgment because it did not receive sufficient notice. Accredited also argues that under CR 60(b)(4), the court should have vacated the order granting judgment because of misrepresentation. Finally, Accredited argues that under CR 60(b)(11) the court should have vacated the order granting judgment because of extraordinary circumstances. We conclude that Accredited's motion to vacate was properly denied because it received sufficient notice of respondent's intention to make a claim on the bond, there was no misrepresentation that prevented it from fully and fairly presenting its case or defense, and it has not shown extraordinary circumstances that entitle it to relief.
The trial court's decision on a motion to vacate is reviewed for abuse of discretion. Luckett v. Boeing Co., 98 Wn. App. 307, 309, 989 P.2d 1144 (1999). A court abuses its discretion when its decision is based on untenable grounds or reasoning. Luckett, 98 Wn. App. 309. A trial court's decision on a motion to vacate a judgment will be overturned only when it plainly appears that discretion has been abused. State v. Santos, 104 Wn.2d 142, 145, 702 P.2d 1179 (1985).
Accredited first contends that the court should have vacated its judgment under CR 60(b)(1) because it received insufficient notice of the respondent's August 13, 2004 motion for judgment and attorney fees. CR 60(b)(1) authorizes the court to vacate a final judgment for "[m]istakes, inadvertence, surprise, excusable neglect or irregularity in obtaining a judgment or order." Accredited further contends that the court should have vacated its judgment under CR 60(b)(5) because without proper notice, a judgment is void. CR 60(b)(5) authorizes the court to vacate a final judgment on the basis that it is void.
Accredited received sufficient notice of respondent's August 13, 2004 motion for judgment and attorney fees. Notice must be "`reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections. . . .' The reasonableness of the notice provided is determined by the totality of the circumstances." Herring v. Texaco, Inc., 132 Wn. App. 479, 482, 132 P.3d 1102 (2006) (quoting Mullane v. Central Hanover Bank Trust Co., 339 U.S. 306, 314, 70 S. Ct. 652, 94 L. Ed. 2d 865 (1950) (footnote omitted). Accredited was not served with the August 13, 2004 motion for judgment and attorney fees. However, Accredited knew respondents intended to seek fees on the bond because on June 10, 2004, respondents sent a letter to Accredited informing it of their intention to make a claim on the bond. Accredited knew the TRO had been dissolved and that as the surety that posted the bond, it was liable. Additionally, not only did Accredited have notice of the August 13, 2004 motion for judgment and attorney fees, a response to the motion was submitted on its behalf on August 30, 2004.
Most importantly, Accredited received notice of the motion for entry of the judgment that it appealed. Respondent served Accredited with a copy of its December 27, 2004 motion for entry of judgment, including the proposed findings of fact and conclusions of law. Accredited submitted a response on January 3, 2005. Furthermore, respondents agreed to postpone proceedings in the lawsuit in response to Accredited's request that respondents file a claim on the bond. Respondent filed a claim, but Accredited never processed it.
Accredited cites no authority stating that under CR 60(b)(1), a judgment against a surety must be vacated if the surety was not served with a motion for judgment. In Burton v. Ascol, 105 Wn.2d 344, 715 P.2d 110 (1986), a surety argued that a judgment entered against it was void because it was not notified of the findings of fact, conclusions of law, and judgment. The court held that the lack of notice did not void the judgment because the surety could show no prejudice resulting from the lack of notice. Burton, 105 Wn.2d at 352. Similarly, Accredited has not established that it suffered any prejudice by not being served with respondent's August 13, 2004 motion for judgment and attorney fees. In fact, it submitted responses to respondents' August 13, 2004 motion for judgment and attorney fees and respondents' December 27, 2004 motion for entry of judgment. There is no evidence the court did not consider its responses.
Accredited contends that the court should have vacated its judgment under CR 60(b)(4), which authorizes the court to vacate a final judgment for "misrepresentation." Accredited argues that respondents made a misrepresentation to the court when it stated that Accredited did not oppose its motion for attorney fees. Respondents made this statement because they were never served with Accredited's response to its August 13, 2004 motion for attorney fees. Misrepresentation under CR 60(b)(4) must cause the entry of the judgment such that the losing party was prevented from fully and fairly presenting its case or defense. Lindgren v. Lindgren, 58 Wn. App. 588, 596, 794 P.2d 526 (1990). The party attacking a judgment under CR 60(b)(4) must establish misrepresentation by clear and convincing evidence. Lindgren, 58 Wn. App. at 596. Here, Accredited has not presented any evidence that it was prevented from fully and fairly presenting its case or defense.
Finally, Accredited contends that the court should have vacated its judgment under CR 60(b)(11), which authorizes the court to vacate a judgment for "[a]ny other reason justifying relief from the operation of the judgment." The use of CR 60(b)(11) is confined to situations involving extraordinary circumstances not covered by any other section of CR 60(b). In re Marriage of Yearout, 41 Wn. App. 897, 902, 707 P.2d 1367 (1985). Accredited dedicates only two sentences to its CR 60(b)(11) argument and does not state the extraordinary circumstances that entitle it to relief.
Standing
Respondents contend that cross-appellant Leslie O'Bryant does not have standing to make arguments on behalf of Accredited because she is not an aggrieved party under RAP 3.1. Respondents dedicate only one paragraph to this argument and do not cite any cases. O'Bryant and Accredited do not address the issue.
We need not decide this issue because O'Bryant's arguments on behalf of Accredited are identical to the arguments in Accredited's brief. The only issue unique to O'Bryant's brief is whether the trial court's judgment against her violated the automatic stay.
Automatic Stay
O'Bryant contends that the judgment entered against her violated the automatic stay. We conclude the court did not violate the automatic stay because O'Bryant's bankruptcy case was dismissed by the time judgment was entered against her. O'Bryant filed for bankruptcy on August 26, 2004, her case was dismissed on December 1, 2004, respondent's motion for entry of judgment was filed on December 27, 2004, and judgment was entered against O'Bryant on March 11, 2005. O'Bryant's argument lacks merit because she was not in bankruptcy from the day the motion for entry of judgment was filed to the day judgment was entered against her.
Attorney Fees on Appeal
Respondents claim that they are entitled to attorney fees and costs on appeal. We conclude that respondents are entitled to attorney fees and costs on appeal based on RAP 18.1(a), the language of the bond and case law.
Under RAP 18.1, a party may be awarded attorney fees on appeal where "applicable law grants to a party the right to recover reasonable fees or expenses on review. . . ." A prevailing party may recover attorney fees authorized by statute, equitable principles, or agreement between the parties. Landberg v. Carlson, 108 Wn. App. 749, 758, 33 P.3d 406 (2001). In addition, the court may also award attorney fees based on the language of a surety bond. See Knappett, 92 Wn.2d at 647. Accredited's bond states that it is liable for "all costs and damages that the [respondents] may sustain in consequence of" an improperly obtained temporary injunction. Additionally, case law allows parties to recover under a bond for any damages caused by a wrongfully issued injunction or temporary restraining order. See Knappett, 92 Wn.2d at 647.
As discussed above, the language of the bond is broad enough to encompass attorney fees and costs incurred dissolving the TRO and resisting Accredited's subsequent attempts to avoid liability on the bond. Just as we conclude that respondent is entitled to attorney fees for trial work done after the TRO was dissolved, we also conclude that respondent is entitled to an award of reasonable attorney fees for work done necessary to enforce the bond after the TRO was dissolved.
For the forgoing reasons, we affirm and award attorney fees on appeal to respondents.
SCHINDLER and GROSSE, JJ., concur.