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Bailie Communications v. Trend Business Systems Inc.

May 6, 1991; As Amended August 22, 1991.

BAILIE COMMUNICATIONS, LTD., ET AL, APPELLANTS,
v.
TREND BUSINESS SYSTEMS, INC., ET AL, RESPONDENTS



Kennedy, J. Scholfield and Baker, JJ., concur.

Author: Kennedy

This is the second appeal in this matter. In the first appeal, Bailie Communications, Ltd. v. Trend Business Sys., 53 Wash. App. 77, 765 P.2d 339 (1988), review denied, 113 Wash. 2d 1025 (1989) (Bailie I), this court reversed the trial court's judgment and remanded with instructions that judgment be entered in favor of the Bailies (the individual appellants) against Trend Colleges, Inc. (Trend) in the amount of $175,000. On remand, the trial court entered judgment for this amount but denied the Bailies' request for prejudgment interest. The trial court found that, because the Court of Appeals had characterized the recovery as being based on "unjust enrichment", it was necessarily an unliquidated amount that could not be determined without exercising discretion and, therefore, would not support an award of prejudgment interest. The trial court awarded postjudgment interest from the date the award was entered on the remand by the Court of Appeals.

The Bailies brought the present appeal challenging the denial of prejudgment interest and the award of postjudgment interest from the date of the entry of the judgment on remand. We reverse as to the denial of prejudgment interest and affirm the award of postjudgment interest.

Facts

The facts of the case are set forth in Bailie I:

On December 1, 1979, the Bailies assigned their one-third interest in a Hawaiian condominium to Suburban Investment Corporation, which already owned the remaining two-thirds. Suburban agreed to pay $175,000 over a 6-year period. The Bailies retained the right to use the condominium for 8 weeks each year until the entire balance was paid.

Harold T. Wosepka, president of Trend Colleges, Inc., guaranteed Suburban's payment obligation in a letter dated December 7, 1979. Wosepka used Trend's letterhead and signed "Harold T. Wosepka, President," but the text of his letter did not mention Trend. Instead, Wosepka wrote that he would "personally guarantee" Suburban's obligation.

The Bailies used the condominium pursuant to the usage agreement up through November 30, 1980, when the first installment of $29,000 to $30,000 representing $5,000 in principal, became due. Neither Suburban nor Wosepka paid this amount or any other portion of the purchase price.

Suburban and Wosepka told the Bailies that Suburban could not pay the installment when it became due. However, they assured the Bailies that the Bailies would receive $175,000 from the proceeds of a $300,000 mortgage of the condominium in complete satisfaction of Suburban's assignment obligation. The only requirement was that the Bailies cosign Suburban's mortgage. The mortgagee demanded that the Bailies cosign the mortgage because the Bailies remained record holder of one-third of the condominium.

The assignment required the Bailies "upon demand by Suburban" to "provide Suburban with any additional document, instrument, assignment, or conveyance which Suburban shall require in order to obtain an insurable title". However, Suburban did not rely on this provision. Instead, Suburban and Wosepka fraudulently induced the Bailies to cosign the mortgage by intentionally misrepresenting Suburban's inability to pay and Suburban's intent to accelerate payment from the mortgage proceeds. As an additional inducement, Suburban signed a written memorandum of the usage agreement, which was originally oral.

The Bailies discovered in June 1981 that Wosepka infused the entire $300,000 into Trend. Suburban and Wosepka intended this result originally, because Trend desperately needed working capital. The Bailies filed suit in July 1983, when the mortgagee foreclosed. They named Suburban, Wosepka, and Trend, among others, as defendants.

The Bailies asserted two theories of liability against Trend. First, they claimed that Wosepka bound Trend with the guaranty letter, in view of an alleged prior understanding that Trend would guarantee Suburban's obligation. Second, the Bailies argued that Trend was a participant in Suburban and Wosepka's fraud.

The Bailies prevailed against Suburban on its assignment contract and against Wosepka on his guaranty letter. However, the court dismissed the claim against Trend. First, the court ruled that Wosepka's letter did not bind Trend. Second, the court found that the Bailies were not damaged by Suburban and Wosepka's fraud. Additionally, the court ruled that Wosepka was not acting on behalf of Trend when he and Suburban perpetrated the fraud.

53 Wash. App. at 78-79.

This court reversed the trial court, finding that, although Wosepka's guaranty did not bind Trend and that Wosepka was not acting on behalf of Trend, the Bailies had been damaged by the fraud. They had given up the right to rescind the assignment of their interest in the condominium after Suburban defaulted on its payment. This right

was valued by an agreement between Suburban, Wosepka and Bailies at $175,000. Trend knowingly benefited from this fraud because the money obtained on the mortgage had been infused into Trend as working capital, and at the time, Wosepka was the sole stockholder in Trend.

This court stated that, as a result of this fraud, Trend had been unjustly enriched, and remanded the matter to the trial court with directions that judgment be entered in favor of the Bailies against Trend for $175,000.

On remand the trial court was presented with the issue of whether prejudgment interest would be awarded on the $175,000. The trial court stated:

Both parties would agree, in looking at the issue of prejudgment interest, that it is the character of the original claim, rather than the Court's ultimate method for awarding damages, that determines whether the prejudgment interest is allowable.

The question is: What was the claim upon which the Court of Appeals awarded judgment in this matter? I would find that the claim upon which the appellate court awarded judgment was unjust enrichment, as is set forth at Page 85 of the opinion in sub two, "Trend's liability for unjust enrichment does not depend on the capacity on which Mr. Wosepka uttered his misrepresentation." It is under a heading at the top of Page 85 entitled "Unjust Enrichment." It appears to me that the character of the claim upon which they awarded liability, that the liability theory that was used was unjust enrichment.

Then they go on to talk about how they arrive at the amount of $175,000. They go on to determine that "the extent ...


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