WA - Criss v Ehrsam

HERBERT W. and ESTHER R. EHRSAM, husband and wife, Respondents and Cross Appellants.

Fred and Aletha Criss appeal from an order on summary judgment dismissing their claims against Herbert and Esther Ehrsam for fraud, negligent misrepresentation, civil RICO[1] and Consumer Protection Act (chapter 19.86 RCW) violations. The Ehrsams cross-appeal for attorney fees on Aletha's claims. We affirm.

In 1989, Fred Criss[2] and his daughter, Aletha Criss, were looking for a new place to live. Fred saw an advertisement in an Oregon newspaper for a riverside lot at Sandpiper Cove, a development the Ehrsams owned on the Lewis River in Clark County.

In July 1989, the Crisses drove to Sandpiper Cove and met Herbert Ehrsam. Herbert and his wife had developed Sandpiper Cove and divided the property into several parcels. When the Crisses visited, they noticed manufactured homes on other lots in Sandpiper Cove, but no travel trailers. Herbert showed the Crisses the five-acre parcel that is the subject of this lawsuit. A previous owner had obtained a travel trailer permit for this parcel and had installed a pad for the trailer and a septic tank. The Crisses told Herbert that they needed a permanent home. The Crisses assert that Herbert told them they could put a manufactured home on the property.[3] Fred testified during a deposition that he would not have bought the property if he had known there were any restrictions. Herbert maintains that he told the Crisses that they could place a manufactured home on the lot at their own risk.

Herbert referred the Crisses to Jimmy Dean, who had sold manufactured homes to the owners of other lots in Sandpiper Cove. Herbert reportedly told Fred that Dean 'would take care of everything.' Clerk's Papers (CP) at 249.

Fred decided to buy the lot later in July. The earnest money agreement and a real estate contract used for the sale explicitly did not warrant any use of the lot in violation of local zoning ordinances. The earnest money agreement instructed 'the person acquiring fee title' to the parcel to 'check with the appropriate city or county planning department to verify approved uses.' CP at 10 (capitals omitted). The earnest money agreement also stated in relevant part that'{t}he property is to be conveyed by good and sufficient deed free and clear of all liens and encumbrances except . . . zoning ordinances, {and}building and use restrictions{.}' CP at 10. The real estate contract provided that '{t}he seller does not guarantee any use of the property . .. in violation of applicable land use laws and regulations.' CP at 13.

Within six months of buying the property, Fred purchased a manufactured home from Dean and installed it on the lot. Unfortunately, the lot was on a flood plain and the County prohibited putting permanent structures on it. Herbert held a travel trailer permit from Clark County, issued in 1981, which stated the lot was on a flood plain and precluded building permanent structures on it. Herbert did not tell the Crisses about this permit.

Approximately six months to a year after his manufactured home's installation, Fred learned that he did not have a permit for it. He began to ask his neighbors if they had permits for their manufactured homes and learned that they did not but were 'keeping their mouth{s} shut.' CP at 246. Fred was aware that if he went to the County, it would cause problems. The Ehrsams were also aware that permanent structures could not be built on the Crisses' lot or on other lots in Sandpiper Cove without violating the zoning ordinances. But the Ehrsams and the other owners of permanent buildings on the flood plain apparently relied on lax enforcement of the County's zoning ordinances.

The Crisses allege that Herbert told them 'don't go bothering the County,' and so they did not. CP at 320. Relevant to the Ehrsams' cross-appeal, Aletha was not a signatory to any of the documents transferring the lot from the Ehrsams to Fred. But on April 26, 1993, Fred executed a quitclaim deed to his daughter, Aletha, conveying to her an undivided one-half interest in the property.

In 1996, the Lewis River flooded its banks. Clark County inspected the damage and became aware of the noncompliant manufactured homes in Sandpiper Cove, including the Crisses' manufactured home. On April 29, 1996, the County sent Fred a letter stating that his manufactured home was placed without a permit and giving him until October 1, 1996, to remove it.

The Crisses did not remove the manufactured home. On January 23, 1997, the County issued a Notice and Order telling Fred that his manufactured home was in a floodway and ordering him to remove it within 10 days. The Crisses would be fined $100 per day, beginning 10 days from the notice date. The Crisses appealed this decision, which stayed the imposition of fines during the appeal. After a hearing, a Clark County hearing examiner entered a final order on April 18, 1997. The final order required the Crisses either to remove the travel trailer within 90 days or to apply to FEMA[4] for an amendment to the floodplain designation of the property. The Crisses apparently submitted this application, but it was denied on November 20, 1997. The denial letter required the Crisses to remove their manufactured home within 30 days of November 20 or be subject to penalties. On June 28, 1999, the County sent the Crisses a letter stating that because they had not removed the manufactured home, liens totaling more than $39,000 had been filed for the periods from April 19, 1997 through June 28, 1999.

Fred and Aletha Criss filed this lawsuit on December 30, 1999, alleging breach of contract, breach of warranty deed, and fraud. The Crisses amended their complaint on April 24, 2000, adding Consumer Protection Act(CPA) and federal civil RICO claims. The Ehrsams moved for summary judgment. On May 12, the superior court granted the Ehrsams's summary judgment on the breach of real estate contract and breach of warranty claims, but denied summary judgment on the fraud claim.

The Ehrsams then moved for summary judgment on the CPA and RICO claims and renewed their motion on the fraud claim. The superior court granted summary judgment on all remaining claims and dismissed the complaint. The superior court awarded the Ehrsams contractual attorney fees on the contract claim. But the superior court denied the Ehrsams fees against Aletha because it determined that her claim was not frivolous. The superior court entered final judgment against Fred and Aletha Criss for $6,643.13.

The Crisses appeal dismissal of their fraud, CPA, and RICO claims. The Ehrsams cross-appeal, arguing that Aletha Criss's claim was frivolous and that they should be awarded attorney fees.

On a review of summary judgment, we engage in the same inquiry as the trial court. Huff v. Budbill, 141 Wn.2d 1, 7, 1 P.3d 1138 (2000). Summary judgment is appropriate when there are no issues of material facts and the moving party is entitled to judgment as a matter of law. CR 56(c); Huff, 141 Wn.2d at 7. We view the facts in the light most favorably to the Crisses as the non-moving party and we review de novo matters of law. Schaaf v. Highfield, 127 Wn.2d 17, 21, 896 P.2d 665 (1995).

The Crisses first contend that the trial court erred in dismissing their fraud claims on statute of limitations grounds. They assert that because they did not suffer actual, appreciable damages until the County filed a lien in 1997, the statute of limitations on their fraud claim did not begin to run until then. The statute of limitations for a fraud claim is three years from the time the cause of actions accrues. RCW 4.16.080(4). Washington follows the discovery rule: A cause of action does not accrue until the plaintiff knew or should have known the essential elements of his or her cause of action.[5] RCW 4.16.080(4); Green v. A.P.C., 136 Wn.2d 87, 95, 960 P.2d 912(1998). Accrual begins when the 'aggrieved party discovers, or should have discovered, the fact of fraud{.}' Hudson v. Condon, 101 Wn. App. 866, 875, 6 P.3d 615 (2000), review denied, 143 Wn.2d 1006 (2001). In order to survive summary judgment on the statute of limitations, the Crisses must not have had an actionable claim for damages before December 30, 1996 (three years before they filed their claim).

In an action for common law fraud, the claimant is entitled to relief when the fraudulent acts cause damages. First Md. Leasecorp v. Rothstein, 72 Wn. App. 278, 282, 864 P.2d 17 (1993). But the plaintiff need not know the full extent of the damages: '{K}nowledge of some actual, appreciable damage is sufficient to begin the running of the statute of limitations.' Hudson, 101 Wn. App. at 875. And the discovery rule requires due diligence in discovering the basis for the cause of action. Allen v. State, 118 Wn.2d 753, 758, 826 P.2d 200 (1992). As a matter of law, one who has notice of facts sufficient to prompt a person of average prudence to inquire has notice of all facts that the inquiry would disclose. Enter. Timber, Inc. v. Wash. Title Ins. Co., 76 Wn.2d 479, 483,457 P.2d 600 (1969).

The Crisses had sufficient facts to prompt them to inquire about the status of their property, including damages, in 1990. At that time, they learned from their neighbors that no one in Sandpiper Cove had a permit for a manufactured home, including the Crisses and the Ehrsams. The Crisses knew they had damages because they had already purchased the home from Dean and had built a porch and outbuildings. They could have sued for the costo f the manufactured home and for its installation, including the porch and outbuildings, as they eventually did in 1999.

The Crisses argue that because they appealed the County's ruling and did not know exactly which damages the County would impose until the final order of the hearing examiner in 1997, the damage element of their fraud claim was not evident until then. The Crisses rely on First Maryland Leasecorp to support their argument. In that case, the court held that 'a fraud action for damages brought before damages are incurred would be premature and subject to dismissal.' First Md. Leasecorp, 72 Wn. App. At 282. But the Crisses need not have known the full extent of their future damages to have filed a claim in 1990. See Hudson, 101 Wn. App. at 875 ('{t}herunning of the statute is not postponed by the fact that the substantial damages occur later, and is not postponed until the specific damages occur for which the plaintiff seeks recovery.'). For these reasons, the statute of limitation started to run in 1990. The trial court properly dismissed the fraud claim.

The Crisses brought a cause of action under the civil provisions of the RICO.[6] They contend that the trial court erred in dismissing these claims on statute of limitations grounds.

Civil claims under the RICO have a four-year statute of limitations. Agency Holding Corp. v. Malley-Duff & Assocs., Inc., 483 U.S. 143, 156, 107S. Ct. 2759, 97 L. Ed. 2d 121 (1987). Therefore, to have been timely brought on December 30, 1999, the Crisses' RICO claim must not have accrued before December 30, 1995.

The elements of a civil RICO claim are (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity (predicate acts) (5) causing injury to the plaintiff's business or property. 18 U.S.C. sec.sec. 1964(c), 1962(c).

The Ninth Circuit follows the 'injury discovery' rule for accrual of civil RICO claims. Rotella v. Wood, 528 U.S. 549, 553, 120 S. Ct. 1075, 145 L.Ed. 2d 1047 (2000); Pincay v. Andrews, 238 F.3d 1106, 1109 (9th Cir.),cert. denied, 122 S. Ct. 195 (2001); Grimmett v. Brown, 75 F.3d 506, 511(9th Cir. 1996). This rule has two parts. Grimmett, 75 F.3d at 510. First, the statute of limitations begins to run when a plaintiff knows or should have known of the injury that underlies the claim. Pincay, 238 F.3dat 1109; Grimmett, 75 F.3d at 510. Second, under the ''separate accrual rule,' . . . a new cause of action accrues for each new and independent injury{.}' Grimmett, 75 F.3d at 510-11.

The Crisses' claim under the first part of this rule resembles their fraud claim. The Crisses knew or should have known of injuries when they discovered that they and their neighbors did not have permits for their manufactured homes in 1990. The damage they suffered for the costs associated with installing the manufactured home and perhaps for loss of the benefit of the bargain, accrued at this time. Because they did not bring their claim for damages under RICO within four years of that date, the statute of limitations barred these claims.

But the Crisses also claim a separate accrual of damages in April 1997 when the County imposed fines and liens on their property. If the imposition of these fines and liens is a 'new and independent injury' under RICO's separate accrual rule as adopted by the Ninth Circuit, then the statute of limitations would not bar a claim based on those damages. Grimmett, 75 F.3d at 510. For the separate accrual rule to apply, the new injury must be the resulto f 'new overt acts {that} occur within the limitations period{.}' Grimmett, 75 F.3d at 512 (quoting State Farm Mut. Auto. Ins. Co. v. Ammann, 828 F.2d 4, 5 (9th Cir. 1987)). ''A corollary rule is that damages may not be recovered for injuries sustained as a result of acts committed outside the limitations period.'' Grimmett, 75 F.3d at 512 (quoting State Farm Mut. Auto. Ins. Co., 828 F.2d at 5).The new act must be 'a new and independent act that is not merely are affirmation of a previous act; and . . . {i}t must inflict new and accumulating injury on the plaintiff.' Grimmett, 75 F.3d at 513 (quoting Pace Indus., Inc. v. Three Phoenix Co., 813 F.2d 234, 238 (9th Cir. 1987)).Here, the Crisses argue that the imposition of fines and liens by the County is a new and independent act giving rise to separate accrual. But the damages the Crisses suffered due to the County's final order and liens against their property were a direct result of the Crisses relying on Herbert's allegedly fraudulent statements in 1989, well before the statute of limitations period. Therefore, the corollary to the separate accrual rule applies here to bar the Crisses from recovering from these damages.

The Grimmett court applied the separate accrual rule to determine whether Grimmett suffered new injuries within the limitations period when her husband's bankruptcy proceedings were completed. Grimmett, 75 F.3d at514. The court determined that Grimmett's primary injury was the loss of the interest in the medical practice, which was known in 1989. The later completion of the bankruptcy was not a new and independent act inflicting anew injury. Grimmett, 75 F.3d at 514.

The Grimmett court clarified that it must distinguish between 'uncertain damage, which prevent{s} recovery, from an uncertain extent of damage, which {does} not prevent recovery; that is, the failure to establish an injury, from the not uncommon imprecision with regard to its scope.' Grimmett, 75 F.3 at 517 (limiting the holding of Bankers Trust Co.v. Rhoades, 859 F.2d 1096 (2nd Cir. 1988). The court determined, again, that the bankruptcy action merely determined the extent of Grimmett's previous time-barred damage, not whether damage existed.

The Crisses rely on a Second Circuit case cited by the Grimmett court, Bankers Trust. Grimmett, 75 F.3d at 513. In Bankers Trust, defendant was accused of (1) concealing assets during a bankruptcy proceeding in 1974-76,(2) conducting harassing lawsuits in 1978-79, and (3) fraudulently conveying property in 1981. Grimmett, 75 F.3d at 513 (citing Bankers Trust, 859 F.2d at 1102-05). The court applied the separate accrual rule and found that two latter injuries were sufficiently independent of the first one. Grimmett, 75 F.3d at 513 (citing Bankers Trust, 859 F.2d at 1102-05).

The present case is distinguishable from Bankers Trust because the County's fines and liens were not independent of the initial act of alleged fraud. Although the liens against the Crisses' property were new injuries that were dependent on a final order, they were the direct results of the Crisses' reliance on Herbert's alleged misrepresentations. Therefore, the separate accrual rule does not save the Crisses' RICO claim. The trial court properly dismissed it.

The Crisses also contend that their CPA claim was improperly dismissed. Statute of Limitations for the Consumer Protection Act The CPA has a four-year statute of limitations. RCW 19.86.120. But, as the Crisses point out, there is a lack of case law establishing precisely when a cause of action accrues under the CPA for statute of limitations purposes.

To set forth a CPA claim, a plaintiff must allege '(1) an unfair or deceptive act or practice, (2) occurring in trade or commerce, (3) public interest impact, (4) injury to plaintiff in his or her business or property and (5) causation.' Sing v. John L. Scott, Inc., 134 Wn.2d 24, 30, 948 P.2d 816 (1997) (citations omitted).The Crisses make an argument similar to the one they make above: Their claim did not accrue until the County imposed fines and liens on their property in 1997. They argue that they suffered no actual and appreciable damage until the fines and liens were imposed. They also argue, as they did with their RICO claim, that the 1997 imposition of fines and liens area separate accrual. These arguments fail here as they do above.

The Ehrsams cross-appeal, arguing that the trial court erred when it ruled that Aletha's claim was not frivolous. Herbert contends that because Aletha did not obtain an interest in the property until after she and Fred knew that they did not have a permit for their manufactured home, her claim is frivolous.

We review the trial court's ruling on attorney fees under RCW 4.84.185for an abuse of discretion. Snohomish County v. Citybank, 100 Wn. App. 35,995 P.2d 119 (2000). A trial court abuses its discretion when its exercise of discretion is manifestly unreasonable or based upon untenable grounds or reasons. State v. Stenson, 132 Wn.2d 668, 701, 940 P.2d 1239 (1997), cert. denied, 523 U.S. 1008 (1998).

RCW 4.84.185 allows a court to award attorney fees to a party who is forced to defend a frivolous claim advanced without reasonable cause. A lawsuit is 'frivolous,' under RCW 4.84.185, and will support an award of attorney fees when it cannot be supported by a rational argument on the law or facts. Forster v. Pierce County, 99 Wn. App. 168, 183, 991 P.2d 687, review denied, 141 Wn.2d 1010(2000). Even when claims are tenuous, no fees are warranted under RCW 4.84.185 when they are not brought for purposes of delay, nuisance, spite, or harassment. Schmerer v. Darcy, 80 Wn. App. 499, 509, 910 P.2d 498(1996).

Here, the trial court did not abuse its discretion in denying the Ehrsams attorney fees against Aletha. There was no evidence that Aletha's claims were brought to harass the Ehrsams. Because Aletha's claims were the same claims that her father brought, the litigation burden to the Ehrsams was not increased because Aletha was a plaintiff. The Eshrams's argument fails.

Both parties request attorney fees on appeal. Because the Ehrsams were properly denied fees under RCW 4.28.185 below, we decline to award them here. The Crisses argue that the cross-appeal by the Ehrsams was frivolous andr equest fees under RAP 18.9. But the Crisses do not adequately brief their reasons for requesting fees under RAP 18.9 (entitled 'Violation of Rules). Therefore, we decline to award the Crisses attorney fees on appeal.

A majority of the panel having determined that this opinion will not be printed in the Washington Appellate Reports, but will be filed for public record pursuant to RCW 2.06.040, it is so ordered.

[1] Racketeering Influenced and Corrupt Organizations Act, 18 U.S.C. sec. sec. 1961-1968.

[2] We refer to the parties individually by their first names for clarity. No disrespect is intended. Collectively, Fred and Aletha are referred to as 'the Crisses.' Herbert Ehrsam is referred to as 'Herbert' when actions and statements are attributed to him. We refer collectively to Herbert and Esther as 'the Ehrsams.'

[3] Because this is an appeal of summary judgment against the Crisses, weview the facts in the light most favorable to them. See Davis v. State, 144 Wn.2d 612, 615 n.1, 30 P.3d 460 (2001).

[4] Federal Emergency Management Agency.

[5] 5 The elements of fraud are: (1) A representation of an existing fact, (2) its materiality, (3) its falsity, (4) the speaker's knowledge of its falsity or ignorance of its truth, (5) his intent that it should be acted on by the person to whom it is made, (6) ignorance of its falsity on the part of the person to whom it is made, (7) the latter's reliance on the truth of the representation, (8) his right to rely upon it, (9) his consequent damage. Kirkham v. Smith, 106 Wn. App. 177, 183, 23 P.3d 10 (2001).

[6] 18 U.S.C. sec. sec. 1961-1968.

Fraud Law Resources for Oregon and Washington