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Arzola v. Name Intelligence, Inc.

Court of Appeals of Washington, Division 1

June 15, 2015

GUSTAVO NELSON ARZOLA, an individual, MICHAEL KLATT, an individual, and SUSAN PROSSER, an individual, Appellants/Cross Respondents, CARL TAYLOR, an individual, Plaintiff,
v.
NAME INTELLIGENCE, INC., a Washington corporation; and JAY WESTERDAL, an individual, Respondents/Cross Appellants.

TRICKEY, J.

Where a party has voluntarily satisfied a trial court decision that the appellate court later modifies, RAP 12.8 requires the trial court to order restitution in appropriate circumstances. Here, the defendants appealed a judgment that awarded the plaintiffs damages for nonpayment of wages. This court modified that judgment, determining that the compensation paid plaintiffs did not constitute wages. Thus, the defendants were entitled to recover the monies they had paid for exemplary damages, attorney fees, and litigation expenses. Defendants were also entitled to prejudgment interest assessed from the time payment was made.

The defendants cross appeal the interest rate for prejudgment interest awarded, asserting that the trial court was required to impose the statutory rate of 12 percent. Because this is an action in equity, the court can determine the prejudgment interest rate. Here, the trial court awarded 5 percent prejudgment interest. Under the circumstances, the trial court did not abuse its discretion in its equitable award of prejudgment interest. We affirm.

FACTS

Gustavo Arzola, Michael Klatt, and Susan Prosser (collectively, Arzola) were employees of Name Intelligence Inc. (Nl), a Washington corporation co-founded by respondent Jay Westerdal, its chief executive officer, president, and 100 percent shareholder. Arzola sued Nlfor monies owed under stock right cancellation agreements. The trial court determined that the amounts owed constituted wages. The trial court entered a judgment on February 18, 2011, which included exemplary damages, attorney fees, and costs as required under chapter 49.52 RCW.

Nl and Westerdal paid the judgment in full, submitting a check to Arzola's counsel. At the same time, they notified Arzola that they were appealing the judgment. On appeal, Nland Westerdal challenged the trial court's decision that payments owed to Arzola constituted wages entitling Arzola to exemplary damages of twice the amount of wages wrongfully withheld, as well as attorney fees and costs. This court held that the monies owed did not constitute wages and reversed the award of exemplary damages, attorney fees, and costs.[1]

Nl and Westerdal filed a motion under RAP 12.8 to recover the monies paid along with 12 percent prejudgment interest. The trial court awarded the monies Nl had paid for exemplary damages, attorney fees, and costs, but awarded only the 5 percent prejudgment interest. Arzola timely appeals.[2]

Nl and Westerdal cross appeal, arguing that the prejudgment interest rate should be 12 percent.

ANALYSIS

This court reviews an award under RAP 12.8 for a manifest abuse of discretion. Ehsani v. McCullough Family P'ship, 160 Wn.2d 586, 589, 159 P.3d 407 (2007). An abuse of discretion occurs only when exercised in a manifestly unreasonable manner or on untenable grounds. In re Marriage of Littlefield, 133 Wn.2d 39, 46-47, 940 P.2d 1362 (1997).

RAP 12.8 provides:

If a party has voluntarily or involuntarily partially or wholly satisfied a trial court decision which is modified by the appellate court, the trial court shall enter orders and authorize the issuance of process appropriate to restore to the party any property taken from that party, the value of the property, or in appropriate circumstances, provide restitution. An interest in property acquired by a purchaser in good faith, under a decision subsequently reversed or modified, shall not be affected by the reversal or modification of that decision.

A party is entitled to a refund where one has satisfied a later reversed judgment. Sloan v. Horizon Credit Union, 167 Wn.App. 514, 520, 274 P.3d 386 (2012).

Arzola's argument that RAP 12.8 does not require restitution after modification of a judgment is not well taken. Our Supreme Court has construed RAP 12.8 as requiring practitioners and courts to look to the common law of restitution as set forth in the Restatement of Restitution to determine the post reversal remedy. Eh ...


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