Washington

Warning: The following opinion is provided for purposes of discussion only. We have not Shepardized™ this opinion, and do not know the subsequent disposition of this case nor whether the effect of the opinion has been overruled or superceded by other law.

Powell v. Sphere Drake Insurance, P.L.C.,
108 Wash.App. 1007 (Wash.App.Div.1 09/04/2001)

Washington Court of Appeals

No. 46829-4-I

108 Wash.App. 1007, 2001.WA.0001324

September 04, 2001

DAVID POWELL, APPELLANT/CROSS-RESPONDENT,

v.

SPHERE DRAKE INSURANCE, P.L.C., RESPONDENT/CROSS-APPELLANT.

Source of Appeal: Appeal from Superior Court of King County Docket No: 97-2-00356-3 Judgment or order under review Date filed: 05/15/2000 Judge signing: Hon. Kathleen J. Learned

Counsel: Counsel for Appellant(s) Anthony J. Ginster 401 2nd Ave S Ste 700 Seattle, WA 98104 George H. Luhrs Attorney At Law 1601 5th Ave Ste 2201 Seattle, WA 98101-1625 Counsel for Respondent(s) Robert J. Bocko 1301 5th Ave Ste 1515 Seattle, WA 98101-2625 Philip Lempriere 1301 5th Ave Ste 1515 Seattle, WA 98101-2625

The opinion of the court was delivered by: Appelwick, J.

Concurring: Susan R. Agid, Walter E. Webster

UNPUBLISHED OPINION

Sphere Drake, a marine liability insurer, orally promised to give David Powell a Letter Of Undertaking (LOU) in exchange for his release of an insured vessel from judicial arrest. Powell released the vessel, but did not obtain the signed LOU from Sphere Drake. Five years later, Powell filed this suit, claiming that Sphere Drake breached its oral promise to tender a signed LOU. Powell also claimed violations of the Consumer Protection Act and the Uniform Fraudulent Transfer Act. The trial court granted Sphere Drake's motions for summary judgment. We affirm.

FACTS

David Powell sustained physical injuries while working on the Alaskan Eight vessel. Alaskan Pacific Star, Inc. and Alaska Eight Star Enterprises, Inc. (collectively APS) own the vessel.

In 1992, Powell filed a commercial and personal injury action in the Alaska federal district court against APS. He arrested the vessel to secure APS's payment of his potential damages award.

A federal magistrate held a post-arrest bond hearing on April 2, 1992. The magistrate placed a value of $160,000 on Powell's personal injury claim and a value of $61,000 on Powell's commercial claim. In order to release the vessel from arrest, APS was required to post a bond for $221,000.

After the hearing, the parties began to negotiate for the vessel's release from arrest. Attorney Matthew Reynolds represented Powell and attorney Charles Ray represented APS. APS's marine liability insurer, Sphere Drake Insurance P.L.C., also participated in the negotiations. Joe Stacey of LeGros, Buchanan, Paul & Whitehead served as Sphere Drake's counsel.

On April 9, 1992, Stacey faxed a draft of a LOU to Reynolds and Ray. The two-page draft provided that in consideration of Powell's release of the vessel without bond, Sphere Drake Underwriting Management Ltd., Sphere's management firm, would pay any final judgment up to $160,000:

In consideration of your releasing from arrest the ALASKAN EIGHT, arrested under process in rem in the subject action, of your not requiring the posting of a release bond or security other than this undertaking, and of your not attaching other assets of the vessel's owners as security for damages for all claims arising from the alleged personal injury as alleged in your complaint, the undersigned does irrevocably undertake and agree as follows:

(a) To pay in full (upon written demand served upon LeGros, Buchanan, Paul & Whitehead of Seattle, Washington, as attorneys for said vessel) any final judgment or judgments not exceeding in the aggregate US$160,000 entered in favor of plaintiff, David Powell, as may be provided by a final judgment or judgments for personal and psychological injuries .

(b) It is understood and agreed that the signing of this letter by Lamorte Burns (Northwest), Inc. is not to be construed as binding it, but is to be binding only upon Sphere Drake Underwriting Management, Ltd. SPHERE DRAKE UNDERWRITING MANAGEMENT, LTD., by LAMORTE BURNS (NORTHWEST), INC.

By Linda Pysher

The undersigned warrants that it is specially authorized to give and execute the covenants above-described by the protection and indemnity underwriter of ALASKAN EIGHT, pursuant to telefax authority received by Lamorte Burns (Northwest), Inc. as agents for Sphere Drake Underwriting Management, Ltd.

LAMORTE BURNS (NORTHWEST), INC. By Linda Pysher

Stacey's faxed cover sheet to Ray said that the draft was 'a Sphere Drake letter of undertaking.' Powell approved the draft LOU as proposed. On April 10, 1992, Stacey faxed the final LOU. The final LOU was the same as the draft LOU. Neither the draft LOU, nor the final LOU contained the signature of Linda Pysher, the manager of Seattle's Lamorte Burns. Sphere Drake hired Lamorte Burns as its claims adjuster. According to Reynolds, Stacey and Ray assured him that Pysher would later sign the LOU. Powell released the vessel that day.

Sometime that same day, Powell also agreed to settle his commercial claims with APS. This agreement was made between Powell and Chuck Aldrich, the President of APS. The contract provided:

{I}n consideration for this settlement, David Powell . . . agree{s} to take immediate action to release the Alaskan Eight from U.S. Marshal's arrest and to dismiss with prejudice the in rem and in personam contract actions initiated in United States District Court at Anchorage . . . .

The settlement explicitly reserved Powell's right to continue to pursue his 'in personam rights with respect to personal injuries incurred while he was a crewmember' on the vessel.*fn1

By November 1992, APS had dissolved. The vessel had been again arrested in a separate and unrelated action. Powell, through new counsel, initially intervened in the proceeding, but later withdrew when he learned that there would not be sufficient proceeds to satisfy his claim.

Meanwhile, Powell's personal injury case was pending in the Alaska federal district court. Powell had obtained a new lawyer. The federal court rendered a $125,000 judgment on Powell's personal injury claim on January 18, 1996.

Through this action, Powell seeks to collect his judgment from Sphere Drake, alleging breach of contact, violation of the Consumer Protection Act, and a violation of the Uniform Fraudulent Transfer Act (UFTA). The trial court dismissed all of Powell's claims on summary judgment. Powell appeals.

ANALYSIS

A trial court's summary judgment order dismissing a claim is reviewed de novo by this court. Babcock v. State, 116 Wn.2d 596, 599, 809 P.2d 143 (1991). We engage in the same inquiry as the trial court and consider the facts in the light most favorable to the nonmoving party. Babcock, 116 Wn.2d at 599. The trial court's dismissal of a claim will be affirmed only if, from all the evidence, reasonable persons could reach but one conclusion. Babcock, 116 Wn.2d at 599. Although the trial court's order in the present case does not state the ground upon which the trial court based its dismissal, we may affirm the order on any grounds supported by the record. Hadley v. Cowan, 60 Wn. App. 433, 444, 804 P.2d 1271 (1991).

I. CONTRACT CLAIM

An action upon a contract or an express or implied liability that is not in writing and does not arise out of any written instrument must be brought within three years. RCW 4.16.080(3). 'If parol evidence is necessary to establish any material element of the written contract, then the contract is partly oral and the three-year statute of limitations applies.' Barnes v. McLendon, 128 Wn.2d 563, 570, 910 P.2d 469 (1996). ''In assessing whether a cause of action exists, it is generally accepted that a right of action upon a contract does not accrue . . . until the agreement is to be performed or payment thereunder becomes due by its terms.'' Sethre v. Washington Educ. Ass'n, 22 Wn. App. 666, 671, 591 P.2d 838 (1979) (quoting 51 Am. Jur. 2d Limitation of Action sec. 126 (1970).

Citing Sethre, Powell claims that his action on the contract did not accrue until Sphere Drake was obligated to pay his personal injury judgment, which he obtained on January 18, 1996. In Sethre, the plaintiff sought retirement benefits in accordance with the terms of a pension plan that was agreed to many years before the court action. The defendant challenged the action, claiming that any rights under the contract were barred by the statute of limitations. A division of this court found that '{s}ubstantial problems would result if the date of the original wrong rather than the date pension benefits were denied was the time when the cause of action accrued.' Sethre, 22 Wn. App. at 671. The court reasoned that it would place an undue burden on employees, unversed in law, to be wary about possible abuses or errors by their pension fund years before they even applied for benefits. Sethre, 22 Wn. App. at 672. The court said that if the time for a cause of action began to accrue on the date of the original wrong, such a law would promote piecemeal review of pension plans. The court considered this to be a waste of judicial resources. Sethre, 22 Wn. App. at 672.

Sethre is distinguishable on two grounds. First, the plaintiff in Sethre brought suit to enforce a promise to pay. Although Powell argues on appeal that he seeks enforcement of Sphere Drake's oral promise to pay his judgment, his pleadings make clear that his claims arise from Sphere Drake's refusal to deliver the signed LOU or to provide a security arrangement. Indeed, Powell's second amended complaint states that '{a}fter release of the vessel, defendant insurer failed to deliver the letter of undertaking . . . .' Additionally, paragraphs 5.1 and 5.2 allege:

5.1 Through defendant insurer's promises and acts described in paragraphs 2.4 to 2.9 above, defendant insurer expressly or implicitly agreed to provide plaintiff a security agreement on his claims including an agreement to secure payment of any judgment he might take on his personal injury claim up to $160,000.

5.2 Defendant insurer reasonably expected that its promises to provide a letter of undertaking and a security arrangement to Plaintiff, as described in paragraphs 2.6 and 2.7 above, would induce Plaintiff to release the security he held, namely the vessel. Plaintiff released the security he held in justifiable reliance on defendant insurer's promises

We find that Powell pled breach of an oral agreement to sign. He did not plead that Sphere Drake failed to fulfill its oral promise to pay. Second, the plaintiff in Sethre was unaware of any injury until he was denied the pension benefits. Here, Powell should have known of his injury when Sphere Drake failed to deliver a signed LOU within a reasonable time.

As of April 10, 1992, Powell was under the belief that Pysher would later sign the LOU. When Sphere Drake failed to tender the LOU on April 10, 1992, or within a reasonable time thereafter, Powell should have been put on notice that he had the right to apply to the court for relief. He failed to do so until 1997, five years after the time had begun to accrue. Sphere Drake's failure to tender the signed LOU after two years had passed is not a reasonable time thereafter.

We conclude that his contract claim is barred by the statute of limitations.*fn2

II. CPA CLAIM

Claims brought under the Consumer Protection Act (CPA) must be commenced 'within four years after the cause of action accrues.' RCW 19.86.120. The basis for Powell's CPA claim is Sphere Drake's failure to honor its promise and enter into a security arrangement on April 10, 1992. Powell should have known that he was injured on or about April 10, 1992, when Sphere Drake failed to tender the signed LOU or provide a security arrangement.

Powell does not argue that his knowledge of the injury should have occurred later than one year, sometime in late 1993. He filed this action five years later, and thus we conclude that Powell's CPA claim is barred by the four-year statute of limitations.

III. FRAUDULENT TRANSFER

Washington's UFTA, chapter 19.40. RCW, defines 'transfer' as 'every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, lease, and creation of a lien or other encumbrance.' RCW 19.40.011(12).

Powell claims that APS had a potentional bad faith claim against Sphere Drake, and that a fraudelent transfer occurred when Sphere Drake effectively placed APS's bad faith claim out of Powell's reach. To support his contention that Sphere Drake transferred APS's bad faith claim to itself, Powell cites to the following federal district court findings:

Defendants Alaskan 8 Star Enterprises, Inc. {a}nd Alaskan Pacific Star, Inc. have been dissolved effective November 20, 1992 and November 23, 1992 respectively, and plaintiff is precluded from pursuing this action against those def{endants}.

The federal court later attached an addendum to its ruling: Plaintiff shall be entitled to attempt collection of said judgment against Alaskan Pacific Star Inc from any assets which may have been distributed to the shareholders of said corporations following its dissolution.

Nothing herein shall in any way be deemed to affect one way or the other the question of any insurance coverage that may or may not be provided to Alaskan Pacific Eight Corp or the ability to trigger said coverage.

We fail to see how the above findings show that any of APS's remaining assets, including any bad faith claim, tranferred specifically to Sphere Drake. Hence, we conclude that Powell's UFTA claim has no merit.

IV. CROSS-APPEAL / ATTORNEY FEES

Sphere Drake cross-appeals the trial court's denial of its request for attorney fees and costs.

RCW 4.84.185, the statute on which Sphere Drake relies, authorizes an award of attorney fees and costs against a party who files an action that is 'frivolous and advanced without reasonable cause.' For attorney fees and costs to be awarded under RCW 4.84.185, the lawsuit, as a whole, must be frivolous. Accordingly, where any one of a number of claims is allowed to proceed to trial, fees and costs could not be awarded under the statute as to any of the claims. Biggs v. Vail, 119 Wn.2d 129, 830 P.2d 350 (1992).

Sphere Drake claims that since the trial court properly dismissed all of Powell's claims on summary judgment, it necessarily follows that the court decided that no reasonable person could have found in Powell's favor, and thus Powell's claims were frivolous. We do not find Powell's claims frivolous.

We affirm the trial court's summary judgment dismissal of Powell's claims, and affirm the trial court's denial of Sphere Drake's request for attorney fees.

Opinion Footnotes

*fn1 The parties subsequently entered a new agreement with the agreed upon intention that it would supersede the April 10, 1992, agreement. Neither the former, nor the new agreement refers to Sphere Drake's LOU, even though these agreements released from arrest the same ship that the LOU was to secure release of.

*fn2 Since we conclude that Powell's contract claim is barred by the statute of limitations, we need not address whether Powell could have given adequate consideration to Sphere Drake when he had also released the vessel in consideration of the settlement on his commercial claim.

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