Dalton M, LLC v. N. Cascade Tr. Servs., Inc. (Majority)
Annotate this CaseU.S. Bank National Association foreclosed on property owned by real estate company Dalton M, LLC. The bank did not have the right to do that: Dalton M actually owned the property outright, not subject to any lien. Dalton M ended up suing U.S. Bank to quiet title and for damages for slander of title. Dalton M prevailed at trial on both of those claims. The trial court also awarded substantial fees to Dalton M based on the slander of title claim. The Court of Appeals reversed on that claim, holding that Dalton M had failed to prove its “pending sale” element, which wiped out the sole basis for the trial court's fee award. Instead, the Court of Appeals awarded fees to Dalton M on an entirely new theory that no party had pleaded or argued to the trial court and that the trial court had never considered: the theory that U.S. Bank had engaged in extensive prelitigation bad faith conduct not amounting to violation or contempt of any court order or ruling, and that this provided a new equitable exception to Washington’s general rule that each party must bear their own costs of suit. The Washington Supreme Court determined the appellate court's decision violated both the Rules of Appellate Procedure (RAPs) and Washington controlling precedent. The Court of Appeals violated these rules: it sua sponte raised a new issue that was more like an unpleaded claim, that new issue was distinct from issues or theories raised before, resolution of that new issue was not necessary to resolve the questions presented about the claims actually pleaded, and resolution of that new issue depended on facts that the parties never had a chance to develop at trial. The Supreme Court therefore reversed the Court of Appeals’ award of attorney fees.
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