DO NOT CITE. SEE RAP 10.4(h).

Court of Appeals Division III

State of Washington

Opinion Information Sheet

Docket No. 19126-5-111

Jack Hsieh and Dorothy Hsieh

v.

John Hancock Mutual Life Insurance Co., et al

File Date: 01/02/2001

SOURCE OF APPEAL

Appeal from Superior Court of Walla Walla County

Docket No: 98-2-00330-9

Judgment or

Date filed: 01/24/2000

Judge signing: Hon. Donald Schacht

JUDGES

Authored by Kenneth H Kato

Concurring: Frank L. Kurtz

John A. Schultheis

COUNSEL OF RECORD

Counsel for Appellant(s)

Albert J. Golden

Golden & Knowlton

P.O. Box 1615

Walla Walla, WA 99362-0030

Defendant (s)

James L. Nagle

Walls Walla County Prosecutors Office

5 W. Alder Floor 4

Walla Walla, WA 99362-2837

Martha J. Casey

Assistant Attorney General

3024 Marguerite Blvd

Billings, MT 59102

Respondent(s)

David L. Broom

Paine Hamblen Coffin Brooke & Miller*email Firm@paine-Hamblen.COM

#1200

717 W Sprague Ave

Spokane, WA 99201-3505

Jeffrey M. Kreutz

Meyer Fluegge & Tenney

230 S 2nd St

PO Box 22680

Yakima, WA 98907

Robert C. Tenney

Meyer Fluegge & Tenney

P.O. Box 22680

Yakima, WA 98907

Mary E. McLeod

Paine Hamblen Coffin Brooke & Miller*email Firm@paine-Hamblen.COM

77 W Sprague Ste 1200

Spokane, WA 99201-3922

Mary M. Palmer

Paine Hamblen Coffin Brooke & Miller

717 W Sprague Ave Ste1200

Spokane, WA 99201-3505

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

JACK HSIEH and DOROTHY HSIEH, husband and wife,

Appellants,

No. 19126-5-III

v

THE STATE OF WASHINGTON

DEPT. OF ECOLOGY, a Washington

administrative entity; MICHAEL

HUMPHREYS, in his capacity as

Sheriff of Walla Walla County,

Defendants,

JOHN HANCOCK MUTUAL LIFE INS. CO., a Massachusetts corporation; J. R. SIMPLOT COMPANY, a Nevada corporation; IOWA BEEF PROCESSORS, a

Delaware corporation; JOHN DOES I through X, inclusive,

Division Three

Panel Seven

Respondents.

JACK HSIEH and DOROTHY HSIEH, husband and wife,

No - 19247-4-III

Appellants,

v.

J. R. SIMPLOT COMPANY, a

Nevada corporation; IOWA BEEF

PROCESSORS, a Delaware

corporation; MICHAEL

HUMPHREYS, in his capacity as

Sheriff of Walla Walla County,

Defendants,

UNPUBLISHED OPINION

JOHN HANCOCK LIFE

INSURANCE CQMPANY,

Respondent. FILED

KATO, 0. -- Jack Hsieh had a water permit to appropriate water from the Columbia River for irrigation of property in Walla Walla County. To secure an agricultural loan, Mr. Hsieh executed a mortgage to John Hancock Mutual Life Insurance Company in 1982 on the property covered by the water permit. In 1983, John Hancock foreclosed on the mortgage. Thereafter, J.P. Simplot Co., and Iowa Beef Processors (IBP) acquired the property. Claiming he still held the water permit, Mr. Hsieh filed suit against John Hancock, Simplot, and IBP. The court granted summary judgment dismissal of the action and awarded fees to the defendants. We affirm the dismissal and reverse the fee award.

On April 26, 1976, the Department of Ecology (DOE) issued surface water permit S3-24704P (the permit) to the Esmieu Trust. The permit authorized for a term of 50 years the appropriation of water from the Columbia River for irrigation of specified property in Walla Walla County.

On December 12, 1980, the Esmieu Trust, with DOE approval, assigned the permit to Jack Hsieh. He assigned a portion of the water rights associated with this permit to third parties. After these assignments, he retained the water rights for 2,266 acres in Walla Walla County.

In December 1982, Mr. Hsieh executed a promissory note for $4,l00,000 to John Hancock, which also received as security a mortgage on the property covered by the permit. The mortgage required Mr. Hsieh to directly assign the permit to John Hancock. He did so and John Hancock tendered this assignment to DOE for filing in February 1983. DOE returned it to John Hancock because of a discrepancy between the number of acres assigned to John Hancock and the number of acres in which Mr. Hsieh had an interest.

On or before March 18, 1985, Mr. Hsieh defaulted on the note and John Hancock obtained a judgment and decree of foreclosure on the mortgage. On November 9, 1987, a Sheriff's Deed was issued that covered the real estate to John Hancock.

In January 1987, DOE determined that, because of the unusual characteristics of the water permit, it was unable to issue a 'certificate of water right' recognizing its assignment. In lieu of issuing a certificate, DOE reissued the permit for a term of 50 years and indicated it would be treated as appurtenant to the property described. The reissued water permit also provided that it superseded the previous permit and future transfers and changes could be made pursuant to RCW 90.03.380.2 The reissued permit was recorded in Walla Walla County. A DOE employee stated that this was the only permit of its type in the state and was reissued to circumvent the requirements of RCW 90.03.310.3

In 1990, John Hancock sold a portion of the property covered by the water permit to Simplot. IBP subsequently obtained the remaining portion of the property.

In May 1998, Mr. Hsieh filed a request for a hearing with the Pollution Control Hearings Board to determine who owned the unassigned portions of S3-24704P. The Board dismissed his request for lack of jurisdiction.

In June 1998, Mr. Hsieh filed a petition for review against DOE in Walla Walla County. Simplot intervened. On April 9, 1999, Mr. Hsieh filed an amended complaint adding John Hancock and IBP as defendants and removing DOE. His complaint asked the court to (1) enter a declaratory judgment, (2) impose an injunction, (3) quiet title, and (4) award damages for conversion.

Arguing the statute of limitation had expired, the water permit was appurtenant to the land, and Mr. Hsieh relinquished any rights under the permits by not withdrawing water, John Hancock, Simplot, and IBP moved for summary judgment. Claiming there was no compliance with RCW 90.03.310 so the permit was never assigned, Mr. Hsieh also moved for summary judgment.

Finding the water permit appurtenant to the land and the mortgage and foreclosure documents here had referenced Mr. Hsieh's water permit that passed to John Hancock and subsequently to Simplot and IBP, the court granted summary judgment to John Hancock, Simplot, and IBP. Injunctive relief was denied because the water rights had legally passed to Simplot and IBP. The court determined that the statute of limitation had expired

as to the damage claim and equity prohibited Mr. Hsieh from prevailing on his remaining claims. It also found that RCW 90.03.310 was a recording statute and failure to strictly comply with its rules had no effect on this action.

The court awarded Simplot and IBP $17,152.10 in attorney fees and costs. It awarded John Hancock $48,377 in fees and $1,097.05 in costs. This appeal follows.

Mr. Hsieh claims the court erred by denying his motion to strike certain documents that were submitted in support of John Hancock's motion for summary judgment. We review a trial court's ruling on a motion to strike for an abuse of discretion. Analytical Methods, Inc. v. Dept of Revenue, 84 Wn. App. 236, 244, 928 P.2d 1123 (1996). Summary judgment affidavits must be made based on personal knowledge, set forth facts that would be admissible in evidence, and show that the affiant is competent to testify on the matter. CR 56(e) -

Mr. Hsieh argues that three documents should have been stricken because they were irrelevant. To be admissible, evidence must be relevant. ER 402. Evidence is relevant when it has any tendency to make the existence of any fact more or less probable, provided other rules do not preclude its admission. ER 401.

Mr. Hsieh claims the court should have stricken a document dealing with the assignment of the water permit by Mr. Hsieh. But this document was relevant because it evinced the intent to assign the permit to John Hancock. He also argues this document was inadmissible because there was no evidence it was ever filed with DOE. To the contrary, the record contains a letter from DOE indicating that it did receive the document. The motion to strike was properly denied.

Mr. Hsieh also argues the court should have stricken the mortgage application and the commitment letter because they merged into the mortgage and were thus irrelevant. Provisions of a contract for the sale of real estate, and all prior negotiations and agreements, are considered merged in a deed made in full execution of the contract of sale. Black v. Evergreen Land Developers, Inc., 75 Wn.2d 241, 248, 450 P.2d 470 (1969). One exception to the merger doctrine is if the prior documents are consistent with the final document. Id. Both the application and commitment letter are consistent with the mortgage. The court properly denied the motion to strike.

Mr. Hsieh contends that the court erred by granting summary judgment dismissal of his complaint. On review of an order of summary judgment, an appellate court's inquiry is the same as the superior court's. Our Lady of Lourdes Hosp. v. Franklin County, 120 Wn.2d 439, 451, 542 P.2d 956 (1993). Summary judgment is appropriate 'if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.' CR 56(c). All reasonable inferences from the evidence must be resolved aoainst the moving party, and summary judgment should only be granted if reasonable persons could reach but one conclusion. Detweiler v. J. C. Penney Cas. Ins. Co., 110 Wn.2d 99, 108, 751 P.2d 282 (1988).

In his amended complaint, Mr. Hsieh sought (1) a declaratory judgment, (2) damages for conversion, (3) an injunction, and (4) to quiet title. John Hancock, Simplot, and IBP argued that these claims were either time- barred or barred by the doctrine of laches.

Mr. Hsieh's first claim was for declaratory relief. An action for declaratory judgment must be brought within a reasonable time. City of Federal Way v. King County, 62 Wn. App. 530, 537, 815 P.2d 790 (1991). Determining what is a reasonable time is generally measured by an analogous statute of limitation.4 Neighbors & Friends of Viretta Park v. Miller, 87 Wn. App. 361, 372, 940 P.2d 286 (1997), review denied, 135 Wn.2d 1009 (1998) . A water right is considered real property. Foster v. Sunnyside Valley Irrigation Dist., 102 Wn.2d 395, 400, 687 P.2d 841 (1984). An action to recover real property must be brought within 10 years. RCW 4.16.020

The Sheriff's Deed that transferred ownership of the subject property to John Hancock was issued on November 9, 1987. From that time on, John Hancock began using the water rights under the permit. Mr. Hsieh's claims thus accrued in November 1987. His action to recover real property, i.e., the water permit, should have been brought by 1997. But Mr. Hsieh did not file his complaint until 1998. His amended complaint adding John Hancock, Simplot, and IBP was not filed until 1999. The court properly concluded the declaratory action was not brought within a reasonable time and was therefore time-barred.

Mr. Hsieh made a conversion claim. The court determined that this claim was governed by a six-year statute of limitation and was time-barred as well. But conversion claims are subject to a three-year statute of limitation. Crisman v. Crisman, 85 Wn. App. 15, 19, 931 F.2d 163, review denied, 132 Wn.2d 1008 (1997) (citing RCW 4.16.080(2)). Mr. Hsieh's claim for conversion also accrued in 1987. The statute of limitation therefore expired in 1990, and the claim was not timely brought.5

Mr. Hsieh also sought an injunction prohibiting John Hancock, Simplot, and IBP from intertering with his water rights under the permit and to quiet title in his right to water under the permit. He was requesting in effect an adjudication of water rights, a special form of a quiet title action. Dep't of Ecology v. Grimes, 121 Wn.2d 459, 466, 852 P.2d 1044 (1993) . These claims are equitable. Id. at 466; State v. Lew, 25 Wn.2d 854, 866, 172 P.2d 289 (1946)

As equitable actions, these claims are subject to the defense of laches. Lopp v. Peninsula Sch. Dist. No. 401, 90 Wn.2d 754, 757, 585 P.2d 801 (1978). Laches consists of two elements: (1) inexcusable delay and (2) prejudice to the other party from the delay. Clark County Pub. Util. Dist. No. 1 v. Wilkinson, 139 Wn.2d 840, 848 991 P.2d 1161 (2000) . ' '{T}he main component of the doctrine is not so much the period of delay in bringing the action, but the resulting prejudice and damage to others. '' Cotton v. City of Elma, 100 Wn. App. 605, 694, 998 P. 2d 339 (quoting Wilkinson, 139 Wn.2d at 849), review denied, 11 P.3d 824 (2000). A court will not presume prejudice from mere delay. Cotton, 100 Wn. App. at 695. The defendant bears the burden of showing whether and to what extent he or she has been prejudiced. Id.

Mr. Hsieh had assigned his interest in the water permit to John Hancock in 1982 and had at least constructive notice that the water permit had been reissued in 1987. He also knew that the subject property was transferred to John Hancock in 1987 by the Sheriff's Deed. Yet he waited until 1999 to bring this action. He certainly had knowledge since 1987 of the pertinent facts giving rise to his claims. It was unreasonable for him to wait 12 years to bring this action.

Furthermore, John Hancock, Simplot, and IBP were prejudiced by this delay. John Hancock believed it acquired the water permit with the foreclosure as demonstrated by its communications with DOE. As of 1987, John Hancock relied on the reissued permit providing that the water rights were appurtenant to the land. Simplot and IBP subsequently acquired the land covered by the water permit. The reissued permit stating that the water rights were appurtenant to the land was on file with Walla Walla County. Simplot and IBP were entitled to rely on that filing. They have also used the water pursuant to that permit from the time of their respective acquisitions. If Simplot and IBP were required to stop using the water on their land, they would suffer prejudice. The elements of laches are thus present. The doctrine bars Mr. Hsieh from pursuing his equitable actions.

Although the trial court considered and ruled on the merits of the case, it also noted that the statute of limitation had run with respect to Mr. Hsieh's claim for damages. The court further noted it would be inequitable to grant Mr. Hsieh the relief requested given the lapse of time between the accrual of the action and the bringing of the claim. An order of summary judgment can be affirmed on any ground found within the pleadings and proof. Security State Bank v. Burk, 100 Wn. App. 94, 103,

995 P.2d 1272 (2000) . - The parties pleaded and argued the statutes of limitation and the doctrine of laches as affirmative defenses. The court considered these defenses in ruling on the motion for summary judgment. We therefore affirm the summary judgment dismissal on those grounds.

Mr. Hsieh contends the court erred by awarding attorney fees to John Hancock, Simplot, and IBP. Attorney fees are generally not recoverable in a civil action unless they are specifically authorized by statute, an agreement of the parties, or a recognized ground of equity. Woodcraft Constr. , Inc. v. Hamilton, 56 Wn. App. 885, 887, 786 P.2d 307 (1990) . As for John Hancock, the court based its award on the mortgage provision allowing an award of fees. It also found John Hancock, Simplot, and IBP were entitled to fees under RCW 4.84.185 because Mr. Hsieh's action was frivolous.

There is no dispute that the mortgage contained an attorney fee provision. Typically, such a provision would be the contractual basis authorizing an award of fees, Here, however, John Hancock obtained a judgment and decree of foreclosure on the mortgage. When a valid judgment is entered, the underlying document giving rise to the action is extinguished. See Woodcraft, 56 Wn. App. at 888 (judgment entered upon promissory note extinguished note) . Because the mortgage merged into the judgment, there is no basis for awarding fees based on the extinguished mortgage. See id. The court erred by awarding fees to John Hancock under the mortgage's attorney fee provision.

The court also awarded fees based upon RCW 4.84.185, which permits the court to award fees for a frivolous action. A lawsuit is frivolous when it cannot be supported by a rational argument on the law or facts. Forster v. Pierce County, 99 Wn. App. 165, 183, 991 P.2d 687, review denied, 141 Wn.2d 1010 (2000) . The statute also requires that the action be frivolous in its entirety; if any of the claims asserted are not frivolous, the action is not frivolous. Id. at 183-84.

Although Mr. Hsieh failed to prevail, his claims are not baseless. This is a complex case with unique facts, as reflected by DOE's statement that S3-24704P was the only permit of its kind in the state. Indeed, our manner of resolving this appeal demonstrates that Mr. Hsieh's action was not frivolous. The award of fees is reversed.

John Hancock, Simplot, and IBP have requested an award of attorney fees on appeal for the same reasons they were awarded fees below. Because we have determined they were not entitled to such tees in the trial court, they cannot recover attorney fees here. The parties shall bear their own fees and costs.

The summary judgment dismissal is affirmed; the award of attorney fees is reversed.

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

Kato, J.

WE CONCUR:

Kurtz, CJ. Schultheis, I.

1 Mr. Hsieh's spouse, Dorothy, is also involved in the case. For ease of reference, however, we refer to these appellants as Mr. Hsieh.

2 RCW 90.03.380 states in part:

(1) The right to the use of water which has been applied to a beneficial use in the state shall be and remain appurtenant to the land or place upon which the same is used . . -

3 RCW 90.03.310 states in part:

'Any permit to appropriate water may be assigned subject to the conditions of the permit, but no such assignment shall be binding or valid unless filed for record with the department . . .

4 Mr. Hsieh argues that Neighbors & Friends of Viretta Park v. Miller, 87 Wn. App. 361, 372, 940 P.2d 286 (1997) review denied, 135 Wn.2d 1009 1998), is not persuasive because it concerns a declaratory judgment

brought in a land use action. However, the rule that a declaratory judgment must be sought within a reasonable time applies to all such actions.

5 Mr. Hsich cites RCW 7.28.150 to argue that his claim is not time-barred. This statute, however, refers to the length of time an individual can collect damages in an action to quiet title. The statute has no bearing on the statute of limitation for his conversion claim.