                                                                                             FILED
                                                                                   COURT OF APPEALS
    IN THE COURT OF APPEALS OF THE STATE OF1WMSWaGTON
                                                                                  2015 AUG 1 1      Ali 9: 0
                                                   DIVISION II
                                                                                  S TATE OF WASHINGTON
SCOTT            B.      OSBORNE,          as      Personal                         No. 4476 -  II
Representative of the ESTATE OF BARBARA                                           BY
                                                                                             DEP TY
MESDAG,


                                       Respondent,


           V.



THE DEPARTMENT OF REVENUE OF THE                                             UNPUBLISHED OPINION
 STATE OF WASHINGTON,




          MELNICK, J. —       The Department of Revenue ( Department) appealed a superior court order


requiring it to issue a refund of principal estate tax overpayment and interest to the Estate of
Barbara     Mesdag ( Estate). That order relied on our Supreme Court' s opinion in In re Estate of

Bracken, 175 Wn.2d 549, 290 P. 3d 99 ( 2012).                 In response to Bracken, in 2013, the legislature


amended the Estate and Transfer Tax Act, chapter 8 3. 100 RCW, and made the change retroactive

to the   estates of     decedents, like   Mesdag,    who   died   on or after    May   17, 2005.. Challenges to the


amendment were considered by the Supreme Court in In re Estate of.Hambleton, 181 Wn.2d 802,

809, 335 P. 3d 398 ( 2014),      petition for cert. filed, No.     1471436 ( U. S. June 5, 2015). We stayed this


                                                              issued        October 2, 2014.       The Supreme Court
          pending the Hambleton, decision,
appeal                                              which              on




upheld the validity of the 2013 amendment. Hambleton, 181 Wn.2d at 836.

           The Department argues that the Hambleton opinion resolves this appeal in its favor and

that the superior court' s order should be reversed. The Estate argues that the Hambleton decision

does not apply to this case because the Estate had a final judgment for which no lawful basis to
appeal existed and        because it had    a vested right    to its   refund.   In addition, the Estate argues that


even     if it   owes   the disputed   principal   tax, the   additional     tax was   not   due   until   the legislature
44766 -5 -II



amended the law effective June 14, 2013; therefore, we should order the Department to .refund the

interest the Estate paid under protest, to pay interest on the interest paid under protest, and to pay

interest on the principal tax paid under protest from the payment date until the amendment.

        We hold that the 2013 amendment applies. to the Estate because the Department' s appeal


of the superior court' s order was pending at the, time the amendment became effective and the

Estate did not have a vested right to its refund that would have been impaired by the retroactive

provisions of       the. amended   statute.   Further, Washington' s Administrative Procedure Act (APA)'


requires us    to   remand    to the Department for determination      of   the interest issues.   We reverse the


superior   court' s   order   in the Estate'   s   favor.   We remand this case to the superior court with


instructions for it to enter a judgment in the Department' s favor on the principal tax issue and then

remand the case to the Department for determination of the additional issues.

                                                        FACTS


        Barbara Mesdag died on July 4, 2007. On October 6, 2008, her Estate filed its Washington

Estate and Transfer Tax Return, which included a deduction for qualified terminable interest

property ( QTIP) 2 included in the Estate' s federal taxable estate. The Department disallowed the
Estate' s QTIP deduction and issued a deficiency notice for additional taxes owed on the value of

the QTIP property.        On February 26, 2010, the Estate paid the additional tax plus interest under




  Ch. 34. 05 RCW.


2 A QTIP trust is a testamentary trust that allows a deceased spouse to control the final disposition
of the trust property, while giving the surviving spouse a life estate in the income or use of the
trust property. Hambleton, 181 Wn.2d at 809, 811. The benefit of.QTIP trusts is that trust property
is not taxed when the first spouse dies; trust property is taxed only when the second spouse dies
and the remainder beneficiaries become present interest holders. Hambleton, 181 Wn.2d at 809,
 811.



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44766 -5 -II



protest.    The Estate then            applied            for   a   tax   refund.      The Department denied the Estate' s refund


request with respect to the QTIP property.

           The Estate petitioned the superior court for judicial review of the Department' s denial of

its   refund.    The   parties   jointly         moved          for   a   stay   until   the Supreme Court resolved Bracken.          The


court granted the motion. On October 18, 2012, Bracken issued and the court ruled in favor of the

taxpayers.       175 Wn.2d       at    575- 76.            On February 15, 2013, the Estate moved for judgment on the

pleadings,      and argued       that Bracken               resolved all         issues in its favor. Three days later, legislation


was    introduced that        amended                the definitions         of "    transfer"   and "   Washington taxable estate" to


                                                                                                               decedent.    See LAWS of
expressly include QTIP property in the Washington
                                                  taxable                                        estate of a




2013, 2d Spec. Sess.,            ch.     2, §        2.    The legislation contained an express retroactivity clause that

applied the amendment to estates of decedents, who died on or after May 17, 2005. See LAWS of

2013, 2d Spec. Sess.,         ch.      1, §     1.


           The Department opposed the Estate' s motion for judgment on the pleadings and argued

that the superior court should continue to stay the action so the legislature could consider the fiscal

impact     of   Bracken,   and    because             our    Supreme. Court           should overrule      Bracken. The superior court


refused to stay the action and granted the Estate' s motion, ordering the Department to immediately
refund the Estate' s principal overpayment of estate tax and interest.

           On April 19, 2013, the Department                                appealed       the   superior   court' s   order.   The Estate


immediately           moved   to dismiss the                    appeal     under      RAP 18. 9( c),      alleging that the appeal was

frivolous       and   filed solely for the                 purpose of       delay. On May 29, our commissioner denied the

motion, and ruled that this court could not determine whether the appeal is " solely for the purpose

 of   delay"    without    being      able      to        review     the Department' s       brief.      Commissioner' s May 29, 2013

ruling. We subsequently denied the Estate' s motion to modify the commissioner' s ruling. When



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44766 -5 - II




we ruled on the Estate' s motion to modify, the pending legislation had been signed into law. On

June 14, 2013, the        amendment        took effect. LAWS of 2013, 2d       Spec. Sess.,    ch.   2, § 14.


         Our Supreme Court considered challenges to the amendment in Hambleton, 181 Wn.2d

809.   We       stayed   this    case    pending the Court' s ruling in Hambleton.             Hambleton upheld the


retroactive application of             the 2013   amendment.       181 Wn.2d   at   836- 37.   We lifted the- stay and

ordered the parties to file additional briefing on the applicability of the Hambleton decision. The

Department argues that the Hambleton opinion resolves this appeal in its favor. The Estate

disagrees and argues that the Hambleton decision does not apply to this case because the

Department had no lawful basis to appeal the superior court' s order and the Estate had a " vested

right" to a refund.


                                                       ANALYSIS


         The Estate argues that the 2013 amendment to the Estate and Transfer Tax Act should not

apply to this case because the Estate had a final judgment not subject to appeal under existing law.
The Estate also argues that because its right to a refund had vested, retroactive application of the

2013 amendment would violate due process. We disagree.

         In addition, the Estate argues that even if the amendment applies, the Estate did not owe

the disputed tax         until   the   amendment    became law.      Therefore, the Estate urges us to order the


Department to refund the interest the Estate paid prior to the change in the law, and to order the

Department to pay interest on the collected interest and interest on the principal tax collected

before it       was   due.       The APA requires us to remand the interest issues to the agency for

determination.




                                                               M
44766 -5 -II



I.         STANDARD OF REVIEW


           The superior court granted the Estate' s motion for judgment on the pleadings. In reviewing

such an order, we examine the pleadings " to determine whether the claimant can prove any set of

facts,   consistent with       the   complaint,     that   would entitle     the   claimant   to   relief."   Parrilla v. King

County,     138 Wn.     App.   427, 431, 157 P. 3d 879 ( 2007). Here, the Department notes that the motion


should have been treated as one for summary judgment because the parties presented matters

outside    the   pleadings     to the      superior court, e.     g., the pending legislation.        Summary judgment is

appropriate where, viewing the evidence in the light most favorable to the nonmoving party, there

is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law.

Loeffelholz      v.   Univ. of Wash., 175 Wn.2d 264, 271, 285 P. 3d 854 ( 2012).


           Here, the superior court' s decision to grant judgment on the pleading rather than summary

judgment does          not affect    the   outcome of      this   appeal.   In a tax case, we review a superior court' s


legal    conclusions      de   novo.        Bracken, 175 Wn.2d at 562; Home Depot USA, Inc. v. Dept of

Revenue, 151 Wn. App. 909, 916, 215 P. 3d 222 ( 2009).

II.        APPLICABILITY OF 2013 AMENDMENT


           A.         Final Judgment


            The Estate argues that the retroactive amendment is inapplicable because the superior

 court' s judgment ordering a refund was final. The Estate' s argument is predicated on its allegation

that it had a judgment for the refund amount that should have been final but for the Department' s

 frivolous appeal filed solely for the purpose of delay.

           Hambleton       rejected     a similar    argument.          181 Wn.2d    at   835- 36.    The Hambleton Estate


 argued that the superior court' s ruling was final at the time the legislature enacted the legislation,

 and     therefore, the    amendment           should   not   apply to it.      Hambleton, 181 Wn.2d             at   835.   The




                                                                    E
44766 -5 -II




Hambleton Estate arrived at this conclusion by arguing that the Department had no basis in law to

appeal the order granting summary judgment because the Department appealed the order before

the   amendment was enacted.          Hambleton, 181 Wn.2d                at   835- 36. The Supreme Court found the


Hambleton Estate' s reasoning unpersuasive:

                    Generally, "[ w]hen a new law makes clear that it is retroactive, an appellate
         court must apply that law in reviewing judgments still on appeal that were rendered
         before the law     was enacted, and must alter                the   outcome   accordingly." [ Plaut v.
         Spendthrift Farm, Inc., 514 U. S. 211, 226, 115 S. Ct. 1447, 131 L. Ed. 2d 328
          1995)].     Therefore, despite the existence of a " final" trial court ruling, retroactive
         amendments may apply to cases pending on appeal.

                    A party may     appeal    final trial   court     judgments. RAP 2. 2( a)( 1).    However,
         parties    may   not   frivolously   appeal or appeal          simply fordelay. RAP
                                                                                     purposes of

         18. 9( c). Appellate courts will, on motion from the opposing party, dismiss frivolous
         appeals and appeals brought for purposes of delay. RAP 18. 9( c).

                Here, the trial court entered its order granting summary judgment on April
         19, 2013 and [the Department] filed a notice of appeal on May 16, 2013. The estate
         of Hambleton did not move under RAP 18. 9( c) to dismiss the appeal, and the appeal
         was still pending when the legislature enacted the 2013 amendment. Therefore, the
         retroactive amendment applies to the case.


Hambleton, 181 Wn.2d at 836.


         Here, the Estate acknowledges that the Supreme Court rejected a similar argument in

Hambleton, but it argues that this case is distinguishable on its facts from Hambleton. Unlike in

Hambleton, here the Estate          moved     to dismiss the Department'            s appeal under   RAP 18. 9( c).   The


Estate argued that the appeal was frivolous and filed solely for the purpose of delay.                                Our


commissioner denied the Estate' s motion                    to       dismiss.     The Estate moved to modify the

commissioner' s ruling, but we denied that motion. The Estate argues that by filing the motion to

dismiss, it "   satisfied its necessary procedural predicate to being able to now argue [ that the

Department] had no legitimate basis for its appeal when it was filed, rendering the refund judgment




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44766 -5 - II




in the Estate'    s   favor final   and not subject    to [ the   retroactive amendment]."       Supp. Br. of Resp' t at

11.


         RAP 18. 9( c)        provides   that   we " will,   on   motion of a   party, dismiss   review of a case ...   if


the   application      for   review   is frivolous,   moot, or     solely for the   purpose of    delay."   An appeal is


frivolous if, considering the entire record, it presents no debatable issues upon which reasonable

minds might differ and it is so devoid of merit that there is no reasonable possibility of reversal.

In re Guardianship of Wells, 150 Wn. App. 491, 504, 208 P. 3d 1126 ( 2009).

         The Estate argues that the Department' s appeal was solely for the purpose of delay because

its only aim was to prevent the judgment from becoming final before the legislature enacted the

amendment. The Department argues that its appeal was not frivolous because it had a good -faith

belief that Bracken was wrongly decided and should be overruled by the Supreme Court and that

the legislature would amend the controlling law based on pending legislation.

         We agree with the Department that its appeal was not frivolous when filed because the

Department        made a good -faith argument            for overruling Bracken.        The Department argued that


Bracken should be            overruled at   every opportunity.         It also noted that it may request a transfer to

the Supreme Court under RAP 4.4. Furthermore, the Department anticipated " that the controlling

law may be retroactively amended by the Washington Legislature during the 2013 legislative
session."       Department' s Opposition to Motion to Dismiss ( filed May 13, 2013) at 4. As noted in

its   response    to the      motion    to dismiss, legislation had already been introduced.                Under these


circumstances, we conclude that the Department' s appeal was not frivolous or filed solely for the

purposes of delay.

          The Estate urges us to hold that the judgment in this case should be deemed final as of the

date the    superior court ordered          the   refund.    But the Estate does not cite persuasive authority for




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44766 -5 -II



                                    decline its invitation. "` Where no authorities are cited in support of a
       proposition3




this                  and we




proposition, the court is not required to search out authorities, but may assume that counsel, after

diligent   search,   has found       none."'      State v. Logan, 102 Wn. App. .907, 911 n. 1, 10 P. 3d 504 ( 2000)

 quoting DeHeer           v,   Seattle Post—Intelligencer,             60 Wn.2d 122, 126,- 372 P. 2d 193 ( 1962)).           We


cannot     ignore the fact that because             of   the   appeal,       the judgment   was not       final. Accordingly, we


reject the Estate' s final judgment argument.


           B.       Due ProcessNested Right


           The Estate argues that applying the retroactive amendment violates due process by

depriving the Estate of its vested right to a refund. We disagree.

           A party alleging a due process violation must first establish a legitimate claim of

entitlement      to the   life,   liberty,   or   property     at   issue.    Willoughby    v.   Dep' t   of Labor & Indust., 147


Wn.2d 725, 732, 57 P. 3d 611 ( 2002). "`                   A statute may not be applied retroactively to infringe a

vested right."'      Hambleton, 181 Wn.2d at 828 ( quoting In re Pers. Restraint ofCarrier, 173 Wn.2d

791, 810, 272 P. 3d 209 ( 2012)).


            This notion finds root in the due process clauses of the Fifth and Fourteenth
           Amendments. While due process generally does not prevent new laws from going
           into effect, it does prohibit changes to the law that retroactively affect rights which
           vested under the prior law....




3 The Estate relies on Hambleton, but Hambleton does not support it. The Estate relies entirely on
the Supreme Court having mentioned that the Hambleton Estate did not file a motion to dismiss
the    appeal.    See Hambleton, 181 Wn.2d                 at   836.       The Supreme Court referred to RAP 18. 9( c) to
explain that a mechanism exists for litigants to seek dismissal of frivolous appeals. The Hambleton
Estate did not take advantage of it, and thus, the appeal was still pending. Hambleton, 181 Wn.2d
at 836. Here, the Estate used RAP 18. 9( c), but it was not successful in having the appeal dismissed;
thus, the appeal was still pending. The dispositive fact in Hambleton was that the appeal was still
pending when the legislature amended the statute. And the same is true here.


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44766 -5 -II



                      A] vested right, entitled to protection from legislation, must be
                      something more than a mere expectation based upon an anticipated
                      continuance of the existing law; it must have become a title, legal or
                      equitable, to the present or future enjoyment of property, a demand,
                      or a legal exemption from a demand by another."

Hambleton, 181 Wn.2d                 at   828- 29 (   second alteration     in   original) (   quoting Carrier, 173 Wn.2d at

811 ( quoting        Godfrey    v.   State, 84 Wn.2d 959, 963, 530 P. 2d 630 ( 1975))).                  It is undisputed that


under the amended tax statutes, the QTIP property at issue must be included in the Estate' s taxable

estate.   See RCW 83. 100. 020( 14), ( 15); Hambleton, 181 Wn.2d at 809. Therefore the Department


does   not owe       the Estate a         refund   for taxes it   paid on   the QTIP property.       We reverse the superior


court's order and remand to the superior court for entry of judgment in the Department' s favor on

the principal tax issue.


III.        INTEREST ISSUES


            The Estate argues that even if it is not entitled to a refund of any of the principal estate tax

paid under protest, the tax attributable to the QTIP property was not due until the legislature

amended        the   law   on   June 14, 2013.           Therefore, the Estate urges us to order the Department to


refund the interest paid under protest by the Estate, to pay interest on the interest paid under protest,

and to pay interest on the principal tax paid under protest from the payment date until the effective

date   of   the   amendment.          The Department argues that we should not address these interest issues

because they         were not raised         before the agency. We conclude that the Estate is entitled to raise


these new interest issues, but it must first present its arguments and requests for interest to the

Department for its consideration.


            Generally, under the APA, issues not raised before the agency may not be raised on appeal.

RCW 34. 05. 554.           However,          a   party may   raise a new     issue    on appeal    if "[t] he interest of justice


would     be   served   by   resolution of an          issue arising from ... [      a] change in controlling law occurring




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44766 -5 - II



after   the agency     action."      RCW 34. 05. 554( 1)( d)( i). Under those       circumstances, "[   t] he court shall


remand    to the agency         for determination." RCW 34. 05. 554( 2).


          Here, the interest issues raised in the Estate' s supplemental brief were not presented to the


Department .4 But justice would be served by resolving the interest issues, which arose from a

retroactive change in law after the Department denied the Estate' s refund request. Therefore, once

the superior court enters judgment in favor of the Department on the principal tax issue, we instruct

the superior court to remand this case to the Department for determination of the interest issues
                            l



raised in the Estate' s supplemental brief.

IV.       ATTORNEY FEES


          The Estate requests reasonable attorney fees and costs under RAP 18. 9 and RCW 4. 84. 185

for defending a frivolous appeal. An action is frivolous if, considering the action in its entirety, it
cannot    be    supported       by   any   rational argument   based in fact   or   law. Dave Johnson Ins., Inc. v.


Wright, 167 Wn.         App.     758, 785, 275 P. 3d 339 ( 2012).     The Department successfully appealed the

superior court' s judgment ordering it to refund taxes paid on the Estate' s QTIP property.

Therefore, this action was not frivolous, and we deny the Estate' s attorney fee request.

          We reverse the superior court's order in the Estate' s favor, and remand to the superior court

with instructions for it to enter a judgment in the Department' s favor on the principal tax issue and

then remand. the case to the Department for determination of the additional issues.




4 The Estate requested that the Department refund the tax and interest paid and that it pay interest
on those amounts, based on its argument that .the principal tax was not owed and would be
refunded. The Estate now requests the Department ( 1) refund the interest paid, ( 2) pay interest on

the interest paid, and ( 3) pay interest on the principal tax paid despite that the principal tax is owed
 and will not     be   refunded.       Because of the fundamentally different underlying bases for relief, the
 interest issues the Estate raised on appeal constitute new issues that it must present to the
Department.



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44766 -5 -II.




        A majority of the panel having determined that this opinion will not be printed in the

Washington Appellate Reports, but will be. filed for public record in accordance with RCW 2. 06. 040,

it is so ordered.




                                                              Melnick, J.
                                                                               7
We concur:




  0Worswicic,       J.




        Johanson, C. J.




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