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Colonial Imports v. Carlton Northwest Inc.

August 26, 1996


Superior Court County: King. Superior Court Cause No: 88-2-13106-6. Date filed in Superior Court: 12-17-93. Superior Court Judge Signing: Marsha Pechman.

Written by: Kennedy, A.c.j. Concurred by: Coleman, J., Dissent by: Baker, C.j.

The opinion of the court was delivered by: Kennedy

KENNEDY, A.C.J. -- Carton Northwest, Inc., d.b.a. Don Carlton Honda (Carlton) appeals the trial court's determination that Colonial Imports, trading as Colonial Honda (Colonial) established an equitable estoppel by clear, cogent and convincing evidence. In Colonial Imports, Inc., v. Carlton Northwest, Inc., 121 Wash. 2d 726, 737, 853 P.2d 913 (1993) our Supreme Court remanded that issue to the trial court, noting that "the facts suggest that Colonial has made out a case for equitable estoppel", but declining to resolve the issue as a matter of law because more than one reasonable inference could be drawn from conflicting evidence presented at the trial. Whether the trial court erred depends upon the sufficiency of the evidence to persuade any rational trier of fact that it is "highly probable" that manufacturer's certificates of origin (MSOs) are relied upon in the ordinary course of business (here, the business of dealer exchanges of new cars) to evidence a transfer of ownership. See Colonial Imports, 121 Wash. 2d at 735 (clear, cogent and convincing evidence standard requires trier of fact be convinced the fact in issue is highly probable); and at 736 n.3 (dispositive issue in deciding whether estoppel can lie is whether, in ordinary course of business between dealers, MSOs are relied upon to evidence a transfer of ownership). Because any rational trier of fact could be persuaded by substantial evidence that the dispositive fact is highly probable, and because the evidence here is substantial, we affirm the trial court's judgment in favor of Colonial.

Colonial cross-appeals the trial court's decision to suspend prejudgment interest during the pendency of the previous appeals of this case. The trial court reasoned that Colonial is responsible for the time spent on those appeals because Colonial led the trial court into the error of applying the preponderance of the evidence standard with respect to equitable estoppel. Colonial argues that prejudgment interest is a matter of right and that the trial court abused its discretion by departing from the rule that prejudgment interest will be part of the make-whole remedy to which a litigant is entitled when it recovers a liquidated amount. Although prejudgment interest on the recovery of a liquidated amount ordinarily is a matter of right, we conclude that the right is not absolute and that a trial court may, in its discretion, suspend prejudgment interest where a plaintiff, without a basis in law or a reasoned argument for the extension of law, has invited clear trial court error which must be corrected on appeal before the defendant's liability can be finally determined. Bad faith by the plaintiff is not a prerequisite of the exercise of such trial court discretion. We affirm the trial court's exercise of discretion in this case.


The facts are well stated in Colonial Imports, 121 Wash. 2d at 727-30 and need not be repeated here. The trial court reconsidered the evidence in light of the proper burden of proof as instructed by the Supreme Court, 121 Wash. 2d at 737, and after considering additional briefing and argument, entered findings of fact and Conclusions of law following remand. First, the trial court restated and reaffirmed its previous findings of fact. Next, the court entered supplemental findings regarding MSOs:

a. That in the ordinary course of business between dealers, MSOs are relied upon to evidence the transfer of ownership of the vehicles described thereon.

b. That numerous transactions are conducted every day between dealers using MSOs.

c. That MSOs are carefully guarded by dealers and are not released in a haphazard or careless manner; and

d. That the language on MSOs documenting a transfer of ownership is clear and unambiguous[.]

Clerks Papers at 236. Next, the trial court made supplemental findings regarding the inquiry by Larry Matthews of Colonial Imports to Pat Deacon of Don Carlton Honda:

a. Larry Matthews of Colonial Honda, while in possession of the original MSOs, inquired of defendant "whether everything on the MSOs was as it appeared to be." Pat Deacon of Don Carlton Honda answered "yes." This inquiry was sufficient and reasonable to establish that the MSOs were valid documents and that in fact ownership of the vehicles referenced thereon had been transferred as described on the MSOs.

b. The court also finds that Mr. Matthews['] inquiry was sufficient, that by making such inquiry Mr. Matthews was asking for affirmance of every issue, that there was no need for Mr. Matthews to ask - why are the cars still on your lot - because it was evident to everyone why the cars were on the lot. This was a broker deal; it was self-evident that the cars would not be shipped in one direction only to be shipped in another.

c. Under the circumstances of this case, including Mr. Matthews['] inquiry to Mr. Deacon of Don Carlton Honda, it was reasonable for Mr. Matthews to rely upon the MSOs as evidence of a transfer of ownership from defendant to Imports Unlimited and then from Imports Unlimited to Colonial Honda.

Clerk's Papers at 237. The court went on to conclude that Colonial had made out its case for equitable estoppel with clear, cogent and convincing evidence, and that Carlton was estopped from denying that ownership of the vehicles had been transferred by it to Imports Unlimited and by Imports Unlimited to Colonial. Carton was, therefore, liable to Colonial for conversion.

The court reaffirmed its award to Colonial of $229,209, the sum Colonial had paid to Imports Unlimited for the purchase of the twenty automobiles, and reaffirmed its award of prejudgment interest on that amount from August 1, 1988, the date of the conversion, to January 10, 1991, the date of the original judgment. The court declined Colonial's request to extend the prejudgment interest to cover the two-year period of the appeals to this court and to the Supreme Court:

This court finds that the appeal in this matter was caused in substantial part by plaintiff's position that the evidentiary standard in this case on plaintiff's equitable estoppel claim was preponderance of evidence, which . . . incorrect legal position was a substantial cause of the delay in this case[.] . . . The court suspends interest from January 10, 1991 to the date the judgment following remand is entered.

Clerk's Papers at 240. Colonial calculates that it thereby lost some $81,000 in prejudgment interest.

This timely appeal and cross-appeal followed.

Discussi ...

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