Kenco Enterprises Northwest, LLC v. Wiese
Kenco Enterprises Northwest, LLC v. Wiese
Opinion of the Court
¶1 — A claim for legal malpractice is not assignable, directly or indirectly, to one’s adversary in a proceeding from which that legal malpractice is alleged to have arisen.
FACTS
¶3 Kenco, then owned by Jin and Dong Kang (Kenco/ Kang), sold the Red Lion Hotel in Tukwila to Sleeping Tiger under a commercial purchase and sale agreement and addendum drafted by Kenco/Kang’s attorney, Brett Wiese.
¶4 Sleeping Tiger defaulted on the promissory note and Kenco/Kang brought suit on January 8, 2008. Sleeping Tiger counterclaimed for fraud, negligent misrepresentation, and breach of warranty or contract. Kenco/Kang con
¶5 A pretrial order had precluded Sleeping Tiger from presenting evidence of its total damages because Sleeping Tiger’s discovery responses failed to disclose the final amount of damages it sought. After the jury verdict, but before a judgment was entered, Kenco/Kang’s trial attorney withdrew for nonpayment of fees.
¶6 On February 12, 2010, the trial judge awarded legal fees and costs to Sleeping Tiger in the amount of $207,757. On May 7, 2010, the parties informed the court that they were negotiating a settlement. Kenco/Kang was represented in the settlement negotiations by different counsel. On June 25, 2010, Kenco/Kang and Sleeping Tiger entered into an assignment agreement that provided the Kangs would assign their legal malpractice claims to Kenco and transfer their interest in Kenco to Sleeping Tiger. At the same time and on the same date, Kenco/Kang and Sleeping Tiger entered into a settlement agreement and mutual release. That settlement and mutual release agreement released any claims Sleeping Tiger had against the Kangs so long as they entered into the assignment agreement, stipulated to the salient facts and provided testimony for claims against their attorney Wiese, and transferred ownership of Kenco to Sleeping Tiger.
¶7 A judgment was entered with findings of fact and conclusions of law on July 5, 2010. The basis for the judgment lay in posttrial issues of attorney fees and costs, and Sleeping Tiger’s anticipated motion for additur or, in the alternative, motion for new trial on damages, as well as
1. $196,000.00 paid to Kenco/Kang for interest on the voided promissory note.
2. $140,000.00 in overpayments on mortgage and $21,271.00 in prejudgment interest on $140,000.00 overpayment stipulated to by the parties at trial.
3. $18,374.85 in late fees and penalties because Kenco/ Kang failed to timely pay the bank loans secured by the first and second deed of trust.
4. $390,000.00 Sleeping Tiger paid to settle the suit for earlier franchise termination by Red Lion Hotel.
5. $2,041,304.00 based on overpayment of $3,391,304.00 and adjusted by voided promissory note of $1,350,000.00.
6. $29,708.37 in costs.
7. $178,049.90 in attorney fees
The $3-million-plus judgment was filed on July 6,2010. The following day, the Kangs transferred the limited liability company to Sleeping Tiger.
¶8 Kenco (now owned by Sleeping Tiger) sued its former attorney Wiese for professional negligence arising from Wiese’s representation of Kenco in the commercial real estate transaction that was the subject of the litigation between Kenco and Kenco’s new owner, Sleeping Tiger. Wiese moved for summary judgment dismissal, contending
ANALYSIS
¶9 Several jurisdictions hold that legal malpractice claims are not assignable.
¶10 The same policy considerations present in Kommavongsa are present here. The agreements between Kenco and its adversary create the opportunity and incentive for collusion as to the stipulated damages in exchange for the agreement not to execute on the judgment in the underlying litigation and the transfer of the malpractice claim. This essentially converts legal malpractice into a
¶11 A similar result was reached in Kim v. O’Sullivan,
¶12 Kenco/Sleeping Tiger argues that here there is no assignment since the claim still belongs to Kenco, an entity in its own right. But Kenco has only one asset: its claim against its former counsel on the transaction. Kenco’s metamorphosis as Kenco/Sleeping Tiger amounted to an assignment of that claim, something they had reason to know was problematic after this court’s decision in Kim. As in Kim, this remedy that the parties devised of transferring the claim to Kenco/Sleeping Tiger still smacks of the problems sought to be avoided by the Kommavongsa rule.
Declarations Not Considered
¶14 In an amended notice of appeal, Kenco/Sleeping Tiger challenges the trial court’s order in which it stated it did not consider certain declarations. Trial court rulings on the admissibility of evidence on summary judgment are reviewed de novo, and motions for reconsideration are reviewed for an abuse of discretion.
¶15 The trial court specifically ruled that it did not consider portions of declarations. Orally, the trial court stated:
I know there is a case out there that says if you don’t object, it doesn’t get out of the record. But it doesn’t say you have to file a motion to strike. It’s an evidentiary issue. Even if I grant it, I don’t strike anything from the record, it’s there in the record and I simply disregard it.
The court signed an “Order Granting Defendants’ Second Motion to Strike Declarations.” In the order it is clear that
¶16 In sum, looking at the substance of the transactions surrounding the underlying litigation to enforce the purchase and sale agreement, the settlement agreement, and the resulting acquisition of the original seller, it is evident that Sleeping Tiger acquired Kenco solely for Kenco’s then remaining asset, the malpractice claim. That claim is one against an adversary’s lawyer for causing the result in the underlying litigation and as such is not assignable under the rule of Kommavongsa. We cannot allow this rule to be obfuscated by clever lawyers and legal subtleties.
¶17 The trial court is affirmed.
Review denied at 177 Wn.2d 1011 (2013).
Signed May 31, 2006.
See George L. Blum, Annotation, Assignability of Claim for Legal Malpractice, 64 A.L.R. 6th 473, § 6 (2011).
64 A.L.R. 6th 473, §§ 1, 18-19.
149 Wn.2d 288, 67 P.3d 1068 (2003).
Kommavongsa, 149 Wn.2d at 293.
133 Wn. App. 557, 137 P.3d 61 (2006).
Kim, 133 Wn. App. at 559 (citing Kommavongsa, 149 Wn.2d 288).
CR 56(e); Overton v. Consol. Ins. Co., 145 Wn.2d 417, 430-31, 38 P.3d 322 (2002).
Folsom v. Burger King, 135 Wn.2d 658, 662-63, 958 P.2d 301 (1998); Rivers v. Wash. State Conference of Mason Contractors, 145 Wn.2d 674, 685, 41 P.3d 1175 (2002) (motions for reconsideration are reviewed for an abuse of discretion).
Warner v. Regent Assisted Living, 132 Wn. App. 126, 135-36, 130 P.3d 865 (2006).
ER 802.
Reference
- Full Case Name
- Kenco Enterprises Northwest, LLC v. Brett N. Wiese
- Cited By
- 9 cases
- Status
- Published