Court of Appeals Division II
State of Washington

Opinion Information Sheet

			

    IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

                                       DIVISION  II

COLUMBIA COMMUNITY BANK,                                         No.  41470-8-II

              Respondent/Cross Appellant,                PART PUBLISHED OPINION

       v.

NEWMAN PARK, LLC,

              Appellant/Cross Respondent.

       Armstrong, P.J.  --  Joseph Sturtevant borrowed money from Columbia Community Bank, 

providing collateral with a deed of trust for the Newman Park, LLC property.  To ensure a first 

priority position, Columbia paid off Newman Park's existing loan from another bank, Hometown 

National Bank, and delinquent property taxes on Newman Park's property.        When Sturtevant 

defaulted on the loan, Columbia learned that he might not have had authority from Newman Park

to obtain the loan.  Columbia then sued Newman Park to enforce the loan security agreement or, 

in the alternative, to be equitably subrogated to Hometown's loan to Newman Park.  

       On summary judgment, the trial court denied Columbia's claim that Newman Park was 

liable for the loan Sturtevant had obtained, but the court held that to prevent unjust enrichment, 

Newman Park was liable for the amount Columbia paid on the Hometown loan and the delinquent 

property taxes.  Both parties appeal.  Columbia argues that issues of material fact exist as to 

whether Sturtevant had actual or apparent authority to obtain the Columbia loan.  Newman Park

argues that the trial court erred by subrogating Columbia to Hometown's loan because Columbia 

acted as a "volunteer" in making its loan.  Finding no error, we affirm.  

No.  41470-8-II

                                            FACTS

       In October 2004, Sturtevant submitted an application for an  employer  identification

number on behalf of Newman Park to the secretary of state.  He signed the application "Joseph 

Sturtevant, Managing Member."     Clerk's Papers (CP) at 662.  On October 18, Sturtevant also 

applied to form a limited liability company (LLC) with the state.  Newman Park is a manager-

managed LLC.1  

       Newman Park has 12 investor-members, including Landmark Development Ventures, Inc.; 

Brian and Maya Allen; Rick and Christine Goode; William Lowry; Kurt and Susan Rylander; Jim 

and Jean Schroeder; and Jeff and Kathleen Sunshine.  All the investor-members had invested with 

Sturtevant before.  Sturtevant is not, individually, an LLC member. 

       Landmark initially owned 39 percent of  Newman Park; the other members owned 61

percent.  Sturtevant is the sole shareholder, director, and officer of Landmark.

                            I.  Newman Park Operating Agreement

       Newman Park's  operating  agreement identifies Sturtevant as the "manager"            and 

"managing member."     CP at 471, 475.  In annual reports submitted to the secretary of state, 

Sturtevant also referred to himself as "manager," and once as "managing member."      CP at 128-

35.  The operating agreement does not list Sturtevant as an LLC member; instead, Sturtevant has 

only an indirect membership interest through Landmark.  The operating agreement provides, in 

relevant part:

       1.3 Nature of Business.   The LLC shall acquire, own, develop, sell and complete 

1 A limited liability company is member-managed unless the operating agreement expressly 
provides that it is "manager-managed."   RCW 25.15.150.  "Manager-managed" is a term of art 
referring to the choice to have the manager exclusively decide the company's activities.  6 Unif. 
Ltd. Liab. Co. Act 203(a)(6) (1996); Rev. 6A U.L.A. 407(a) (2006).
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No.  41470-8-II

       a residential subdivision project known as Newman Park situated in Olympia, 
       Thurston County Washington, known as follows:

              3822 Wiggins Road SE (Tax Parcel 11829330300)

       Member Joseph Sturtevant is 100% responsible for satisfactory real estate 
       development and project completion.

CP at 649.

       The operating agreement limits the power of members to borrow money or encumber 

company property; no member can:     (1) incur liability greater than $25,000; (2) pledge company 

property to secure a loan over $50,000; or (3) refinance any obligation leading to aggregate 

indebtedness of over $50,000.

                                  II.  Newman Park Property

       In December 2004, Newman Park purchased real property in Thurston County for 

$500,000.  Newman Park       financed the purchase with a $393,100 loan from Hometown.  

Sturtevant provided Hometown with copies of Newman Park's application to form an LLC, the 

certificate of formation, and the operating agreement.  Newman Park granted Hometown a deed 

of trust on the property.  The deed to Hometown was executed on Newman Park's behalf and 

signed: "Landmark Development Ventures, Inc., Manager of Newman Park LLC By:          Joseph A. 

Sturtevant, President of Landmark Development Ventures, Inc." CP at 670-77.  

       Sturtevant also executed a real estate tax affidavit, settlement statement, and closing 

instructions on Newman Park's behalf, signing each document as "Joseph Sturtevant, President of 

Landmark Development Ventures, Inc., Managing Member."          CP at 85-87, 91, 93, 679.  He 

signed the promissory note as "Landmark Development Ventures, Inc. Manager of Newman Park

                                               3 

No.  41470-8-II

LLC By: Joseph A. Sturtevant, President of Landmark Development Ventures, Inc."      CP at 699.  

In contrast, Sturtevant signed the "Limited Liability Company Resolution to Borrow/Grant 

Collateral" as "Joseph A. Sturtevant, Manager of Newman Park LLC." CP at 694.

       On February 21, 2005, Sturtevant e-mailed to the investors copies of the LLC formation 

application, the certificate of formation, the final closing HUD (Housing and Urban Development) 

papers, the deed transferring title to Newman Park, and the deed of trust to Hometown.  No 

member objected to the documents.

         III.  Columbia Community Bank Loan to Trinity Development-Northwest, LLC

       Sturtevant formed Trinity Development-Northwest, LLC in October 2007.  Sturtevant 

holds a 95 percent interest in Trinity and Robert Leach holds a 5 percent interest.

       In January 2008, Sturtevant sought a loan for Trinity from Columbia.  When Sturtevant 

met with Bradley Volchok, the assistant vice president of Columbia, to discuss the loan, he told 

Volchok that Landmark was the sole member or owner of Newman Park.

       On February 1, Columbia sent Sturtevant a commitment letter offering to lend Trinity 

between $1,500,000 and $2,500,000 as a revolving line of credit.  The loan amount depended on 

whether Columbia paid off Hometown's loan for the Newman Park property and whether the loan 

was secured both by sufficient real estate and a $1,000,000 certificate of deposit.

       The loan commitment letter explained that the loan was to "[p]rovide liquidity for real 

estate investments and development projects," but it did not specify a project.  CP at 288, 297.  

The bank included one contingency in the letter:

       [A] new appraisal for the Newman Park property and an updated appraisal of Joe 
       Sturtevant's personal residence, both to be reviewed and accepted by Columbia 
       Community Bank.  The loan officer will visit both sites as well.

                                               4 

No.  41470-8-II

CP at 299.  

       The commitment letter limited the loan to 65 percent of  Newman Park's property's

appraised value together with 80     percent of the appraised value of Sturtevant's personal 

residence.  Further, the commitment letter stated:

       Additionally, we would appreciate the opportunity for the deposit relationship with 
       Landmark Development Ventures, Inc. and other entities, plus your personal 
       deposit relationship.  

CP at 290.  

       Sturtevant signed and returned the letter to Columbia accepting a loan of $1,500,000

without the $1,000,000 certificate of deposit as additional collateral.  

       On February 22, Sturtevant sent Columbia an altered copy of Newman Park's operating 

agreement, which stated that Landmark owned 100 percent of  Newman Park.  In addition, 

Sturtevant provided Columbia with:  (1) the Newman Park certificate of formation; (2) Newman 

Park's  application to form a  limited  liability  company; (3) a "Limited Liability Company 

Resolution to Borrow/Grant Collateral" on Trinity's behalf that Sturtevant signed as "Managing 

Member of Trinity"; and (4) a "Corporate Resolution to Grant Collateral/Guarantee" also on 

Trinity's behalf that Sturtevant signed as "President/Secretary of Landmark." CP at 343-44, 346.  

Sturtevant provided Columbia with Trinity's certificate of formation and operating agreement,

along with Landmark's certificate of incorporation, bylaws, and corporate resolutions.

                                       IV.  Deed of Trust

       On February 28, Sturtevant executed a promissory note for $1,500,000 to Columbia on 

Trinity's behalf.  The promissory note required payment of all interest and principal by February 

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No.  41470-8-II

28, 2009.  The collateral instrument pledged the Newman Park property as security for the Trinity 

loan by granting Columbia a deed of trust.  Sturtevant signed the deed of trust as follows:

       Grantor:
       Newman Park, LLC
       Landmark Development Ventures, Inc., member of Newman Park, LLC
       By: Joseph A.  Sturtevant, President/Secretary       of  Landmark Development 
       Ventures, Inc.

CP at 208.  

                                          V.  Default

       Columbia paid off the entire Hometown loan and delinquent property taxes on the 

Newman Park property when it made the loan to Trinity.   The Newman Park members discovered 

the transaction in June 2009.  At that time, the members also discovered that Sturtevant had 

presented an altered operating agreement to Hometown.

       Trinity defaulted on the loan.  When Columbia attempted to foreclose on its deed of trust, 

it learned about possible problems with Sturtevant's authorityto obtain the loan.

       Columbia filed a complaint for declaratory judgment, equitable subrogation, and unjust 

enrichment.  It sought a declaration that its deed of trust on Newman Park's property was valid 

and enforceable.  In the alternative, it sought a lien on the Newman Park property under the 

doctrines of equitable subrogation and unjust enrichment.  Newman Park filed a complaint seeking 

a declaration that the deed of trust was invalid and unenforceable.  The actions were consolidated.

       Newman Park moved for summary judgment, arguing that the  deed of trust securing 

Trinity's loan was invalid and unenforceable because Landmark had neither actual nor apparent 

authority to sign the documents.  The trial court granted the motion, ruling that Newman Park's 

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No.  41470-8-II

operating agreement unambiguously named Sturtevant as its manager and that Landmark had no 

actual authority to pledge Newman Park's property as security.    The court also concluded that 

Columbia's apparent authority claim failed because Columbia required a resolution in order to 

confirm authority for the loan.  

       Columbia then moved for partial summary judgment to establish a lien on the Newman 

Park property through equitable subrogation or unjust enrichment.  The trial court granted the 

motion, awarding the bank an equitable lien and judgment in the amount of $491,037.31, plus 

interest. Newman Park moved for attorney fees, which the trial court denied because both parties 

had prevailed on substantive issues.

       Newman Park appeals the trial court's partial summary judgment for Columbia on its 

unjust enrichment and equitable subrogation claims.  Columbia cross-appeals the trial court's 

grant of summary judgment determining the deed was invalid.  

                                          ANALYSIS

                                I. Summary Judgment Standard

       We review a trial court's grant of summary judgment de novo.  Fitzpatrick v. Okanogan 

County, 169 Wn.2d 598, 605, 238 P.3d 1129 (2010).  A court may grant summary judgment if 

the pleadings, depositions, answers to interrogatories, and admissions on file, together with the 

affidavits, show there are no genuine issues of material fact and that the moving party is entitled 

to a judgment as a matter of law.  CR 56(c).  In reviewing a summary judgment, we view "'all 

facts and inferences in the light most favorable to the nonmoving party.'"  Fitzpatrick, 169 Wn.2d 

at 605 (quoting Biggers v. City of Bainbridge Island, 162 Wn.2d 683, 693, 169 P.3d 14 (2007)).

                                               7 

No.  41470-8-II

       Summary judgment is subject to a burden-shifting scheme. The moving party is entitled to 

summary judgment if it submits affidavits establishing it is entitled to judgment as a matter of law.  

See Meyer v. Univ. of Wash., 105 Wn.2d 847, 852, 719 P.2d 98 (1986).       The nonmoving party 

avoids summary judgment when it "set[s] forth specific facts which sufficiently rebut the moving 

party's contentions and disclose the existence of a genuine issue as to a material fact." Meyer, 

105 Wn.2d at 852 (citation omitted).  Thus, the nonmoving party may not rely on speculative or 

argumentative assertions that unresolved factual issues remain.  Seven Gables Corp. v. MGM/UA 

Entm't Co., 106 Wn.2d 1, 13, 721 P.2d 1 (1986).

                                   II. Equitable Subrogation

       Newman Park argues that the trial court erred in granting Columbia summary judgment on 

the basis of equitable subrogation.  Newman Park contends that equitable subrogation does not 

apply because Washington law limits equitable subrogation in this context to mortgagees 

competing for priority and Columbia is not a priority creditor.  Further, according to Newman 

Park, Columbia is not entitled to relief because it volunteered to make the loan. 

       The Washington Supreme Court recently adopted  Restatement (Third) of Property: 

Mortgages § 7.6(a) (1997), which describes equitable subrogation as: 

       One who fully performs an obligation of another, secured by a mortgage, becomes 
       by subrogation the owner of the obligation and the mortgage to the extent 
       necessary to prevent unjust enrichment.  Even though the performance would 
       otherwise discharge the obligation and the mortgage, they are preserved and the 
       mortgage retains its priority in the hands of the subrogee.

       Subrogation is appropriate to prevent unjust enrichment if the person seeking subrogation 

performs an obligation under the following circumstances: 

       (1) in order to protect his or her interest; (2) under a legal duty to do so; (3) on 

                                               8 

No.  41470-8-II

       account of misrepresentation, mistake, duress, undue influence, deceit, or other 
       similar imposition; or (4) upon a request from the obligor or the obligor's 
       successor to do so, if the person performing was promised repayment and 
       reasonably expected to receive a security interest in the real estate with the priority 
       of the mortgage being discharged, and if subrogation will not materially prejudice 
       the holders of intervening interests in the real estate. 

BNC Mortg., Inc. v. Tax Pros, Inc., 111 Wn. App. 238, 255-56, 46 P.3d 812 (2002).  

       One purpose of equitable subrogation is to preserve the proper priorities by allowing a 

mortgagee who satisfies another mortgagee's loan to take that mortgagee's priority position.  

Bank of Am. v. Prestance Corp., 160 Wn.2d 560, 564-65, 160 P.3d 17 (2007).  But the doctrine 

of equitable subrogation is an equitable remedy that generally applies "to avoid a person's 

receiving an unearned windfall at the expense of another."  Bank of Am., 160 Wn.2d at 567.  And 

equitable subrogation may arise when one pays or performs in full an obligation owed by another 

and secured by a mortgage.  Restatement (Third) of Property: Mortgages § 7.6 (cmt. a) (1997).

       Newman Park argues that equitable subrogation does not apply because this is not a 

creditors' priority dispute.  Newman Park focuses on the reference to "priorities" in chapter 7's 

title to support its argument.  Appellant's  Reply Br. at 31.    But the Restatement's general 

discussion of equitable subrogation and the following example demonstrate that equitable 

subrogation applies more broadly than to just setting priorities:

       28. Blackacre is owned by A and B, subject to a mortgage held by Mortgagee-1 
       securing a debt of $100,000.    A and B are tenants in common.      A approaches 
       Mortgagee-2 and induces it to make a loan of $150,000, of which $100,000 is 
       used to pay off the first mortgage in full.  The remaining $50,000 is used by A for 
       other purposes.  B is not a party to this transaction, but A forges B's name on the 
       note and mortgage to Mortgagee-2.  Mortgagee-2 is subrogated to the first 
       mortgage to the extent of $100,000, and can enforce it against B's interest in 
       Blackacre.   Mortgagee-2 is not entitled to subrogation with respect to the 
       remaining $50,000.

                                               9 

No.  41470-8-II

Restatement, supra, § 7.6.

       This example illustrates that equitable subrogation applies even when a mortgagee pays off 

the only existing mortgage and the question is not one of priorities but whether the new 

mortgagee steps into the shoes of the paid-off mortgagee.  Moreover, the example is similar to the 

facts here where one person encumbers the property of another but without authority to do so,

and misuses some of the loan proceeds; the question then is whether the remaining owner should 

be enriched by getting the property debt free. 

       When Columbia made its loan, Hometown held a deed of trust on the Newman Park

property.  To become the first lien holder, Columbia paid Newman Park's loan from Hometown.  

Because it fully performed Newman Park's obligation to Hometown, Columbia is equitably 

subrogated to the amount it paid.  To hold otherwise would give Newman Park a windfall. 

Volunteer Rule

       Newman Park further argues that equitable subrogation does not apply because Columbia 

was a volunteer.  

       Previously, we recognized the volunteer rule in the context of a commercial loan.   BNC 

Mortg., Inc., 111 Wn. App. at 254.  After our decision in BNC Mortgage, Inc., 111 Wn. App. 

238, the Washington Supreme Court considered the volunteer rule in Bank of America, 160 

Wn.2d 560.  In Bank of America, the Court held that equitable subrogation was available in the 

refinance context and,   as previously discussed, adopted Restatement (Third) of Property

Mortgages § 7.6, which rejects the "volunteer" rule.  Bank of Am., 160 Wn.2d at 560-64.     And 

our Supreme Court did not limit its adoption of the Restatement or attempt to preserve the 

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No.  41470-8-II

volunteer rule.  We now conclude that the volunteer rule is no longer a defense where a 

mortgagee pays off another mortgage holder.      We therefore affirm the order granting partial 

summary judgment to Columbia on the basis of equitable subrogation.

       A majority of the panel having determined that only the foregoing portion of this opinion will 

be printed in the Washington Appellate Reports and that the remainder shall be filed for public record 

in accordance with RCW 2.06.040, it is so ordered.

                           III. Deed of Trust -- Sturtevant's authority

       Columbia argues that the trial court erred in granting Newman Park summary judgment 

because both Sturtevant and Landmark had actual or apparent authority to execute the deed of 

trust.  Newman Park responds that the deed of trust is invalid as a matter of law because 

Landmark was not an agent of Newman Park and it had no authority to execute the deed of trust 

to Columbia.

       Sturtevant signed the deed of trust as the president and secretary of Landmark, not as the 

manager of Newman Park:

       Grantor:
       Newman Park, LLC
       Landmark Development Ventures, Inc. member of Newman Park, LLC
       By: Joseph Sturtevant, President/Secretary of Landmark Development Ventures, 
       Inc.

CP at 208.  

       According to the operating agreement, Landmark is a member, but not a manager, of 

Newman Park.  The parties dispute, however, whether Sturtevant or Landmark executed the deed 

of trust as an agent with authorityto act on Newman Park's behalf.

                                               11 

No.  41470-8-II

A.     Actual Authority 

       An LLC can act only through its agents.  Marina Condo. Homeowner's Ass'n v. Stratford 

at the Marina, LLC, 161 Wn. App. 249, 263, 254 P.3d 827 (2011).  An LLC may be member-

managed or manager-managed.  RCW 25.15.150.  A nonmember manager has power to manage 

the LLC's business or affairs specified in the LLC agreement. RCW 25.15.150(2).  Further, if the 

certificate of formation vests management of the limited liability company in a manager or 

managers, no member, acting solely in the capacity as a member, is an agent of the LLC.  RCW 

25.15.150(3).  

       Actual authority may be express or implied.  King v. Riveland, 125 Wn.2d 500, 507, 886 

P.2d 160 (1994), superseded by statute on other grounds.  Implied actual authority depends on 

objective manifestations from the principal to the agent.  King, 125 Wn.2d at 507.  An agent 

acting with actual authority binds the principal.  Blake Sand & Gravel, Inc. v. Saxon, 98 Wn. 

App. 218, 223, 989 P.2d 1178 (1999). 

       Columbia asserts that RCW 25.15.150(3) does not prevent a member, who is also a 

manager, from acting as an agent under his member status.  Columbia cites no authority for this 

proposition, which would allow a member to act for the LLC where the LLC operating agreement 

names a nonmember manager.        Nor does Columbia cite authority for its contention that a 

nonmember manager, such as Sturtevant, can act on a member's behalf alone and still bind the 

LLC.  See RAP 10.3(a)(6).  Here, Landmark is only a member of Newman Park, and it is a 

business entity separate from Sturtevant, the designated nonmember manager of Newman Park.

       Newman Park's  operating  agreement specifically named Sturtevant as manager.  But 

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No.  41470-8-II

Sturtevant was not acting as a manager when he executed the deed of trust to Columbia; rather, 

he signed the instrument on Landmark's behalf  as a member of Newman Park.  Sturtevant's 

signature on Landmark's behalf as a member did not bind Newman Park because Landmark had 

no actual authority as a matter of law.  See RCW 25.15.150(3).  

       The trial court did not err in ruling that Landmark was not an agent of Newman Park and 

had no authorityto execute the deed of trust. The deed of trust was, therefore, invalid as a matter 

of law.  

B.     Apparent Authority 

       Columbia argues that both Sturtevant and Landmark had apparent authority to act on 

Newman Park's behalf.  Because the deed of trust is signed by Landmark as a member, the issue 

is whether Newman Park made objective manifestations to Columbia that Landmark had authority 

to obtain the Columbia loan.  Columbia asserts that disputed issues of material fact preclude 

summary judgment on the issue.  We hold that the trial court properly granted summary judgment 

in Newman Park's favor because Landmark did not have apparent authority to execute the deed 

of trust to Columbia.    

       An agent has apparent authority to act for a principal only when the principal makes 

objective manifestations of the agent's authority "to a third person." King, 125 Wn.2d at 507.

While apparent authority can be inferred from the principal's actions, there must also be evidence 

that the principal knew of the agent's act.  State v. French, 88 Wn. App. 586, 595, 945 P.2d 752 

(1997).  To create apparent authority, a principal's objective manifestations must (1) cause the 

one claiming apparent authority to actually believe the agent has authority to act for the principal, 

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No.  41470-8-II

and (2) the claimant's actual belief must be objectively reasonable.  King, 125 Wn.2d at 507 

(citing  Smith v. Hansen, Hansen, & Johnson, Inc., 63 Wn. App. 355, 364, 818 P.2d 1127 

(1991)).  To prevail, Columbia must prove that Newman Park, the alleged principal, made 

objective manifestations to Columbia, the third party, that caused it to subjectively and reasonably 

believe that Landmark, the alleged agent, had authority to execute the deed of trust.

       In Kiniski v. Archway Motel, Inc., 21 Wn. App. 555, 586 P.2d 502 (1978), Division One 

of this court found no corporate liability based on apparent authority when two corporate 

directors signed documents in their individual capacities.  Kiniski entered into a loan transaction 

with the Thorstads, who held two of the three corporate director positions at Archway Motel, 

Inc.  Kiniski, 21 Wn. App. at 557.  The Thorstads signed all the loan documents, including a 

promissory note and mortgage, in their individual capacity.  Kiniski, 21 Wn. App. at 558.  Kiniski 

did not ask about the actual ownership of the motel; she assumed that the Thorstads owned the 

property individually because the Thorstads lived on the motel property and said they owned it.  

Kiniski, 21 Wn. App. at 563-64.  After the Thorstads defaulted on the loan, Kiniski discovered 

that the motel was a corporation and not the Thorstads' individual property.    Kiniski, 21 Wn. 

App. at 558-59.  Because the corporation had done nothing to suggest it was authorizing the 

transaction, the court concluded that Kiniski failed to prove the Thorstads acted with apparent 

authorityon the corporation's behalf.  Kiniski, 21 Wn. App. at 564.  

       Similarly, the issue here is the capacity in which Sturtevant signed the deed of trust.  

Before entering into this transaction, Sturtevant sent Columbia an altered copy of Newman Park's

operating agreement, which stated that Landmark owned 100 percent of Newman Park.           The 

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No.  41470-8-II

altered operating agreement does state that Sturtevant is the manager of Newman Park.  And 

Sturtevant gave Columbia Newman Park's certificate of formation and its application to form an

LLC, which showed that the LLC was electing to be manager-managed.        Columbia reasons that 

by naming Sturtevant "manager," Newman Park conveyed to third parties that Sturtevant was an 

agent who could act on the LLC's behalf. The argument fails for several reasons.  

       First, Columbia had agreed to make the loan before it received the altered operating 

agreement on February 22.    On February 1, Columbia sent Sturtevant the commitment letter,

which stated that the bank "has approved a commitment" for credit to Trinity and required only 

Sturtevant's acceptance.  CP at 288-91.  Thus, Columbia could not have believed and relied on 

the altered documents when it agreed to make the loan.  

       Second, Sturtevant did not sign the deed of trust as Newman Park's manager.    He signed 

on Landmark's  behalf, as a member.      And nothing in Newman Park's  operating  agreement 

represented that Landmark was Newman Park's manager.         In fact, the documents Sturtevant 

supplied showed that he was the nonmember manager of Newman Park.             Finally, Columbia 

presented no evidence that it relied on Hometown's deed of trust, which Sturtevant signed in the 

same manner.

       The trial court found that Columbia's request for an LLC resolution from Newman Park

evidenced the bank's concern about who had authority to act, undermining the bank's later 

apparent authority argument.  Like the deed of trust, Sturtevant signed the resolution to grant 

collateral as president and secretary of Landmark, member of Newman Park.  The resolution does 

not represent that Sturtevant was signing as Newman Park's manager.2

2 Newman Park submits that when a lender requires a resolution to borrow or grant collateral, 
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No.  41470-8-II

       Columbia failed to present evidence that Landmark had apparent authority to execute the 

loan or that Newman Park made objective manifestations to Columbia of such authority as would 

bind  Newman Park to Trinity's loan from Columbia.  The trial court did not err in granting 

summary judgment to Newman Park on the issue.   

C.     Ratification 

       Columbia also broadly asserts that Newman Park ratified Landmark's grant of a deed of 

trust to Hometown.  But Newman Park's ratification of a single, prior transaction does not show 

that Landmark acted with authority in the loan transaction with Columbia.  Because there is no 

evidence that Columbia relied on Landmark's signature on the Hometown deed of trust, this 

argument fails.   

       Under  agency law, a principal can ratify an agent's unauthorized act by, with full 

knowledge of the act, accepting its benefits or intentionally assuming without inquiry its 

obligation. Stroud v. Beck, 49 Wn. App. 279, 286, 742 P.2d 735 (1987).           The principal's 

constructive knowledge of the act may be sufficient to prove ratification.  Stroud, 49 Wn. App. at 

286.

       In Stroud, the plaintiffs received copies of all the legal documents facilitating a purchase of 

apartments secured by a promissory note and deed of trust in the sellers' favor. Even though the 

plaintiffs did not read the documents, we held that they ratified their agent's  authority by 

assuming the obligation without inquiry and by accepting tax benefits without question.  Stroud,

49 Wn. App. at 286.  

apparent authority is absent, citing to National Bank of Bossier City v. Nations, No. 16826-CA, 
465 So. 2d 929 (La. App. 2nd Cir. 1985).  However, as Newman Park concedes, no Washington 
case supports this bright line rule. 
                                               16 

No.  41470-8-II

       Here, in contrast, Columbia presented no evidence that Newman Park knew Sturtevant 

had fraudulently obtained the loan until a year after the transaction.  Newman Park's members 

discovered the transaction only when Trinity defaulted on the loan and Columbia started 

foreclosure proceedings.  Nor is there evidence that Newman Park members received any benefit 

from the loan.3

D.     Doctrine of Comparative Innocence

       Columbia argues that factual issues exist as to which party should bear the risk of 

Sturtevant's actions.  Specifically, Columbia urges us to use "comparative innocence" principles 

to validate the deed of trust. Br. of Cross Appellant at 48.  Newman Park responds that if there is 

no agency, comparative innocence does not apply.  The trial court concluded that comparative 

innocence did not apply as a matter of law because Landmark did not have agency authority. 

       The comparative innocence doctrine provides that where two innocent persons must suffer 

because of a third person's fraud, the loss should fall on the "innocent" party who enabled the 

fraud.  Sorenson v. Pyeatt, 158 Wn.2d 523, 542 n.16, 146 P.3d 1172 (2006) (citing Stohr v. 

Randle, 81 Wn.2d 881, 882, 505 P.2d 1281 (1973).  But to apply the doctrine, the evidence must

clearly show that the party to suffer the loss acted with some voluntary "act or neglect" that made 

the fraud possible.  Stohr, 81 Wn.2d at 883.

       In Bergin v. Thomas, 30 Wn. App. 967, 972, 638 P.2d 621 (1981), Division Three of our 

court refused to apply comparative innocence where no agency existed.  The Thomases sold their 

clothing store to their son Greg and his wife, Shelly.  Bergin, 30 Wn. App. at 968.  Mrs. Thomas 

3 Because of our application of equitable subrogation, Newman Park owes Columbia the same 
amount it would have owed Hometown.  

                                               17 

No.  41470-8-II

testified that she might have informed the existing creditors of the change.  Bergin, 30 Wn. App. 

at 968.  Greg told the salesman of a distributor that he owned the clothing store; the salesman 

suggested, however, that he should not disclose this fact for credit reasons.  Bergin, 30 Wn. App. 

at 968-69.  Later, Greg and Shelly defaulted on their obligation to the distributor and its assignee 

sued them and the Thomases.  Bergin, 30 Wn. App. at 969.  The court reasoned that because the 

Thomases did not induce or mislead the third party into believing that Greg was their agent, there 

was no apparent agency.4  Bergin, 30 Wn. App. at 972.  And because there was no agency, the 

doctrine of comparative innocence was inapplicable.  Bergin, 30 Wn. App. at 969, 972.  

       We need not reach the issue of whether the doctrine of comparative innocence applies 

only if there is a finding of agency.  Here, there is no evidence that Newman Park acted with some 

voluntary "act or neglect" that made the fraud possible.  See Stohr, 81 Wn.2d at 883.  Under 

these circumstances, comparative innocence does not apply.  

                                       IV. Attorney Fees

       Columbia's deed of trust provides for attorney fees to the prevailing party "at trial and 

upon any appeal." Br. of Resp't at 49; CP at 521.  The trial court denied Newman Park's motion 
for attorney fees.5 On appeal, both parties seek attorney fees under RAP 18.1.  The issues are, 

first, which party prevailed and, second, what effect, if any, the deed of trust has on the grant of 

4 In dicta, the court stated that even if agency was ostensibly found, Greg put the salesman of the 
distributor on notice and this information should be imputed to the principal.  Bergin, 30 Wn. 
App. at 971-72.  Therefore, the court determined that neither of the two parties was innocent.  
Bergin, 30 Wn. App. at 972.  

5 Newman Park assigns error to the trial court's denial of its attorney fees.  But Newman Park 
provides neither argument nor citation to authority to support the claimed error.  RAP 18.1(b).  
Newman Park does not properly argue for attorney fees on appeal.

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No.  41470-8-II

attorney fees.

       A prevailing party may recover attorney fees authorized by statute, equity, or the parties'

agreement.  Thompson v. Lennox, 151 Wn. App. 479, 484, 212 P.3d 597 (2009).  The prevailing 

party in a contract action is entitled to attorney fees if the contract authorizes such an award.

RCW 4.84.330.6    We can award attorney fees and costs to the prevailing party even when we 

have declared the contract containing the attorney fee provision invalid.  Labriola v. Pollard 

Grp., Inc., 152 Wn.2d 828, 839, 100 P.3d 791 (2004).  

       A party is generally a prevailing party if he receives an affirmative judgment in his favor.  

Riss v. Angel, 131 Wn.2d 612, 633, 934 P.2d 669 (1997).  If neither party wholly prevails then 

the substantially prevailing party can recover attorney fees.  Piepkorn v. Adams, 102 Wn. App. 

673, 686, 10 P.3d 428 (2000).  In some instances, if both parties prevail on major issues, the 

court may find neither party to be the prevailing party and, thus, neither is entitled to attorney 

fees.  Phillips Bldg. Co., Inc. v. An, 81 Wn. App. 696, 702, 915 P.2d 1146 (1996).

       In support of their respective positions, the parties point to the various claims and 

amounts at issue.  Newman Park argues that if we hold the deed of trust is  invalid, it is the 

prevailing party.  Newman Park further argues it is the substantially prevailing party because 

invalidating the deed of trust reduced Columbia's claim against the land and eliminates most of the 

6 RCW 4.84.330 states:
       In any action on a contract or lease . . . where such contract or lease specifically 
       provides that attorney's fees and costs, which are incurred to enforce the 
       provisions of such contract or lease, shall be awarded to one of the parties, the 
       prevailing party, whether he or she is the party specified in the contract or lease or 
       not, shall be entitled to reasonable attorney's fees in addition to costs and 
       necessary disbursements.

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No.  41470-8-II

Trinity loan from Columbia's claim.7 Columbia responds that if it "prevails on appeal it is entitled 

to costs and its reasonable attorneys' fees." Br. of Resp't at 49. 

       The trial court denied Newman Park's motion for attorney fees because both parties had 

prevailed on substantive issues.  On appeal, both parties again prevail on major issues.  Newman 

Park prevails as to validity of the deed of trust.     But Columbia prevails on its equitable 

subrogation claim. We conclude that we cannot fairly declare either Columbia or Newman Park

the prevailing party.  Thus, neither is entitled to attorney fees on appeal.

       Affirmed.

                                                 Armstrong, P.J.
We concur:

Hunt, J.

Johanson, J.

7 Newman Park cites Rowe v. Floyd, 29 Wn. App. 532, 535 n.4, 629 P.2d 925 (1981), in support 
of its assertion that we should consider Newman Park the substantially prevailing party.  In Rowe, 
however, Division Three of this court upheld the trial court's order finding each party responsible 
for its own costs and attorney fees because both parties prevailed.  Rowe, 29 Wn. App. at 535-36.

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