IN THE COURT OFAPPEALS OF THE STATE OF WASHINGTON

JENNIFER L. HABU and RICHARD Y. 

### ) No. 791 52-4-I CHINN, husband and wife, 

### ) ) DIVISION ONE Appellants, 

### ) UNPUBLISHED OPINION v. CONRADO A. TOPACIO (also known as 

### ) Conrad A. Topacio and Conrado Jesus 

### ) Topacio), individually; 

### ) CARRIE L. TOPACIO (also known as 

### ) CARRIE LYNN FIELD), individually; the 

### ) marital community ofCONRADO A. 

### ) TOPACIO and CARRIE L. TOPACIO; 

### ) HENRY L. JACKY, individually; 

### ) JENNIFER E. JACKY, individually; 

### ) the marital community of HENRY L. 

### ) JACKYand JENNIFER E. JACKY; 

### ) JAMES P. KOORY, individually, and the 

### ) marital community ofJAMES P. KOORY 

### ) and CRYSTAL B. KOORY; 

### ) SANDRA E. TUREK, individually; 

### ) CHJ PROPERTIES LLC, aWashington 

### ) limited liability company; 

### ) CHJ FOOD SERVICES LLC, a dissolved 

### ) Washington limited liability company; 

### ) DALAWA LLC, aWashington limited 

### ) liability company doing business as 

### ) Vantage Commercial Partners; 

### ) GREEN SKY NW LLC, aWashington 

### ) limited liability company doing business as 

### ) Man J’s Highway Pot Shop; 

### ) JESSICA ELIZABETH-ANN JORDAN, 

### ) individually; MERCHANTS BONDING 

### ) COMPANY (MUTUAL), a surety 

### ) bond company registered in the State of 

### ) Washington; 

### )No. 79152-4-1/2

GEORGINA GAIL LUKE (also known 

### ) Ginger Luke), individually and the marital 

### ) community comprised of herand HANS 

### ) JAKOBLUECK, 

### ) ) Respondents. 

### )

) FILED: February3, 2020 HAZELRIGG-HERNANDEZ, J.

— Jennifer Habu and Richard Chinn seek reversal of an order enforcing a CR 2A term sheet drafted after a two-day mediation. They contend that the term sheet was not a final expression of all material terms ofthesettlementand thereforetheyare notbound bythe document. Becausetheterm sheetdoes notfixall ofthe material obligations ofall parties, we reverse.
FACTS The underlying dispute in this case arose from the purchase and sale ofa commercial property in Everett, Washington. In 2014, Jennifer Habu and Richard Chinn sold the property to CHJ Properties, a limited liability company owned by Conrad Topacio, Henry Jacky, and James Koory. Habu and Chinn alleged that the defendants defrauded them during the sale of the property, thereby discouraging other buyers and causing Habu and Chinn to accept less than the fair marketvalue ofthe propertyas a purchase price. In late 2017, Habu and Chinn brought suit against Conrad Topacio, Carrie Topacio, Henry Jacky, Jennifer Jacky, James Koory, Crystal Koory, CHJ Properties LLC, CHJ Food Services LLC, and Dalawa LLC (collectively, CHJ); Sandra Turek and Merchants Bonding Company (collectively, Merchants); and Green Sky NW LLC and Jessica Jordan (collectively, Green Sky). The complaint

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detailed claimsforfraud, negligence, negligent misrepresentation, violations ofthe ConsumerProtection Act1 and Criminal Profiteering Act,2 breach ofcontract, unjust enrichment, equitable indemnification, recoveryof remedial action costs underthe Model Toxics Control Act (MTCA),3 and a requestfordeclaratory relief. The parties engaged in a two-day mediation in February 2018. The negotiation resulted in the drafting ofa document entitled “CR 2ATerm Sheet” by Habu and Chinn’s counsel. The document provided that the defendants would immediately withdraw their pending motions for summary judgment, for more definite statement, and to dismiss under CR 12(b)(6), and that “[t]he parties agree to memorialize and use their best efforts to fully execute a final Settlement Agreementwithin thirty (30) days ofthe mediation.” Theterm sheet listed thefollowing provisionsthatthe settlementagreement “shall contain.” Habu and Chinn would receive a “$200,000 initial settlement payment” within 60 days ofthe effective date ofthe agreement. On receipt ofthe “$200,000 portion ofthe settlement funds,” Habu and Chinn would dismiss all of theirclaims against all partieswith prejudice, exceptthe claims against CHJ under the MTCA, which would be dismissed without prejudice. After CHJ obtained an appraisal of the property and Habu and Chinn compiled environmental reports forthe property, “the property shall be listed with
a mutually agreeable listing agent.” Habu and Chinn were to be kept informed of any inquiries oroffersto purchasethe property, and ‘[ajIl purchase and saleterms

I Chapter 19.86 RCW. 2 Chapter9A.82 RCW.

~ Chapter70.105D, 82.21 RCW.
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shall be subject to the Plaintiffs’ approval, including but not limited to the sales price. In the course ofthe negotiations, the partieswill act in good faith.” Theterm sheet also stated that: 17. Upon closing, anydebt owed to 9506 LLC [4] (and forwhich 9506 LLC is not requested to carrythe note) shall be paid in full, and the first $350,000 of the sale proceeds over and above the debt repayment shall be paid to Plaintiffs. The balance of any net sale proceeds shall be disbursed to CHJ Properties LLC. Habu and Chinn were not to be responsible for any sale commissions. If the propertydid notsell within twoyears of listing, the remaining partieswould befree to asserttheir MTCA claims against each other. The parties agreed to return to mediation in the eventthat a dispute arose while negotiating the final settlement agreement and “to make a good faith effort to mediate and resolve those disagreements or disputes.” Additionally, the term sheet stated that “[a}II parties executing this Term Sheet represent and warrant thatthey have authorityto sign on behalfofthe person orentity uponwhose behalf they are signing.” It also contained a provision that “[t]he final Settlement Agreement shall be signed by each of the parties before an independent notary public unaffiliatedwith anyofthe parties.” Theterm sheetwas signed byall parties exceptGreen Sky NWLLC and JessicaJordan, with HenryJackysigning on behalf of his wife, JenniferJacky, and James Koory signing on behalfof his wife, Crystal Koory. Overthe nextsix months, the parties exchanged drafts ofafinal settlement agreement based on this term sheet butwere unable to agree on terms related to

~‘ In September2016, 9506 LLC purchased CHJ’s loan from Coastal Community Bank. 9506 LLC is owned by Habu and Chinn but is nota partyto the case. -4-No. 791 52-4-1/5

paragraph 17 of the term sheet. CHJ contended that the $350,000 post-sale payment was contingent on the property selling for a sufficient price, while Habu and Chinn wanted to write the payment into the final agreement as an unconditional obligation. CHJ filed a motion to enforce the CR 2Aterm sheet, which Merchants and Green Skyjoined. Habu and Chinn submitted declarations in opposition to the motion to enforce the term sheet asserting thatthey did not intend the term sheet to be binding when they signed it and did not understand the $350,000 payment to be conditioned on the proceeds ofthe sale being sufficientto coverthe sum. In
an order setting an evidentiary hearing on the motion, the court indicated that it would “apply summary judgment procedures to determine whether there is a genuine dispute regarding the existence and/or material terms of the CR 2A agreement.” It also ruled that “[n]o party may file or serve additional briefing or materials in support of or in opposition to the Motion to Enforce prior to the evidentiary hearing without leave of Court.” The court clarified that the parties would be permitted to present material facts through live testimony at the hearing iftheydesired but noted “that it is unlikelythatthe Courtwould allowthe partiesto try to introduce into evidence through live witnesses any documents or other materialsthat have notalready been filed and served in connection with the motion to enforce.” Atthe hearing, Habu and Chinn attempted to introduce a statementoffacts to which they and Merchants had stipulated concerning other negotiated documentsthat had been signed atthe mediation with the documents attached as

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exhibits. They noted that the stipulation had been prepared as a substitute for Merchants’ live testimony because those defendants were not present at the hearing. CHJ objected, and the court ruled that itwould notconsiderthe stipulation because all parties had not agreed to permit it to be filed and the court had not granted leave to considerthe additional documents. The court granted the motion to enforce the CR 2A term sheet. The court found thatthe parties had entered into a binding CR 2Asettlementagreementthat did not impose an unconditional obligation on CHJ to pay Habu and Chinn $350,000. The court also ordered the parties to enter into a long-form settlement agreement consistent with the CR 2A agreement. Habu and Chinn moved for reconsideration, which was denied. Habu and Chinn appealed. Merchants and Green Skyjoined in CHJ’s opening briefto this court.
ANALYSIS Habu and Chinn argue that the court erred in finding the term sheetto be binding and enforceable. They contend that the term sheet was not final as a matterof law because on itsface itcontemplates negotiation ofadditional material terms and future dispute resolution.
Standard of Review When a moving party relies on affidavits or declarations to show that a settlement agreement is not genuinely disputed, the trial court follows summary judgment procedures. Condon v. Condon, 177 Wn.2d 150, 161, 298 P.3d 86 (2013). Accordingly, the party moving to enforce an alleged agreement bears the

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burden to prove that there is no genuine dispute as to its existence and material terms. j~ at 162. The court reads the parties’ submissions in the light most favorable to the nonmoving party to determine whether reasonable minds could reach only one conclusion. j4~ “[hfthe nonmoving party raises a genuine issue of material fact, atrial court abuses its discretion if it enforcesthe agreementwithout first holding an evidentiary hearing to resolve the disputed issues of fact.” Brinkerhoffv. Campbell, 99 Wn. App. 692, 697, 994 P.2d 911(2000). “Appellate courts give deference to trial courts on a sliding scale based on how much assessment of credibility is required; the less the outcome depends on credibility, the less deference is given tothetrial court.” Dolan v. King County, 172 Wn.2d 299, 311, 258 P.3d 20 (2011). When thetrial court makes a decision based
on written documents and is not required to “assess the credibility orcompetency ofwitnesses, and to weigh the evidence, nor reconcile conflicting evidence,” we reviewthe decision de novo. ~ at 310 (quoting ProgressiveAnimal Welfare Soc’y
v. Univ. of Wash., 125 Wn.2d 243, 252, 884 P.2d 592 (1994)). When the court hears live testimony, we review findings of fact for substantial evidence, recognizing that the trial court is able to assess the credibility and demeanor of testifying witnesses in a mannernotafforded to appellate courts reviewing the cold record. Garofalov. Commellini, 169Wash. 704, 705, 13 P.2d 497 (1932); Peterson
v. Big Bend Ins. Agency, Inc., 150 Wn. App. 504, 514, 202 P.3d 372 (2009). Here, the trial court ordered an evidentiary hearing after the parties submitted their initial written arguments and declarations. None of the parties presented live testimony atthe evidentiary hearing. The court ultimately resolved

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the issue based on the arguments ofcounsel and declarations submitted with the briefing. Although the court entered its findings after an evidentiary hearing, the court relied entirely on written submissions in making these findings. Because of this and because the parties do not dispute the standard of review, we reviewthe trial court’s order on the motion to enforce de novo.
II. EnforceabilityofCR 2ATerm Sheet The common law of contracts applies to settlement agreements. Condon, 177 Wn.2d at 161. Washington follows the objective manifestation theory of contracts. Hearst Commc’ns.. Inc. v. Seattle Times Co., 154Wn.2d 493, 503, 115 P.3d 262 (2005). Fora contracttoform, the parties mustobjectively manifesttheir mutual assentto be bound and theterms assented to must be sufficiently definite. Keystone Land & Dev. Co. v. Xerox Corn., 152 Wn.2d 171, 177—78, 94 P.3d 945 (2004). “[W]e attemptto determine the parties’ intent byfocusing on the objective manifestations ofthe agreement, ratherthan on the unexpressed subjective intent ofthe parties.” Hearst, 154Wn.2d at503. The parties’ subjective intent is generally irrelevant if we can determine their intent from the reasonable meaning of the words used. ki. at 504. Whetherthere was mutual assent is normally a question offact but may be determined as a matter of law where reasonable minds could reach but one conclusion. Keystone, 152 Wn.2d at 178 n.10. An informal agreement may be “sufficient to establish a contract even though the parties contemplatesigning a moreformal written agreement” in certain circumstances. Morris v. Maks, 69 Wn. App. 865, 869, 850 P.2d 1357 (1993). To determine whether the informal agreement is enforceable, we “considerwhether

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(1) the subject matter has been agreed upon, (2) the terms are all stated in the informal writings, and (3) the parties intended a binding agreement priortothetime ofthe signing and deliveryofaformal contract.” Id. (citing Loewiv. Long, 76Wash. 480, 484, 136 P. 673 (1913)). “[IJfaterm is so ‘indefinitethata courtcannotdecide justwhat it means, and fix exactlythe legal liability ofthe parties,’ there cannot be
an enforceable agreement.” Keystone, 152 Wn.2d at 178 (quoting Sandeman v. Sayres, 50 Wn.2d 539, 541, 314 P.2d 428 (1957)). Habu and Chinn cite Keystone in support oftheir argumentthat a contract
was notformed because the parties expressly leftterms open tofuture resolution. In Keystone, the Washington Supreme Court considered whether Washington contract lawwould recognize and enforce an implicitorexplicitagreementbetween two or more partiesto negotiate a future contract. k~. at 173—74. The Keystone court explained the differences between three similartypes of agreements. ki. at 175. The first was an agreement to agree, which is not enforceable in Washington. j~ at 175—76. “An agreement to agree is ‘an agreement to do something which requires a further meeting ofthe minds ofthe parties and without which it would not be complete.” ki. (quoting Sandeman, 50 Wn.2d at 541—42). The second type was an agreement with open terms, under which “the parties intend to be bound by the key points agreed upon with the remaining terms supplied by a court or another authoritative source.” ki. at 176. The third was a contractto negotiate: In a contractto negotiate, the parties exchange promisesto conform to a specific course of conduct during negotiations, such as negotiating in good faith, exclusivelywith each other, orfora specific period oftime. Underacontractto negotiate, the partiesdo not intend

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to be bound if negotiations fail to reach ultimate agreement on the substantive deal. In contrast to an agreement to agree, under a contract to negotiate, no breach occurs if the parties fail to reach agreement on the substantive deal. The contract to negotiate is breached onlywhen one partyfails to conform to the specific course ofconduct agreed upon. ki. (internal citations omitted). Keystone contended that an exchange of letters between its broker and Xerox’s broker created an enforceable contract to negotiate and commitment to prepare a purchase and sale agreement because “all of the key terms of the substantive agreementweresettled.”jçj~at 174—75. The courtfound that Keystone had not identified “an offer and acceptance to be bound to specific standards of negotiating conduct” sufficientto form a contractto negotiate. at 178. Here, unlike Keystone, the term sheet did contain explicit agreements to “use.

. . bestefforts tofully execute afinal SettlementAgreementwithin thirty (30) days of the mediation” and “negotiate in good faith.” This language arguably created an enforceable contract to negotiate on those terms. However, as Keystone makes clear, a contract to negotiate is not breached byfailure to agree on substantive provisions. The Keystone court also determined that the statements made by Xerox’s brokers did not amount to an unconditional commitmentto prepare the purchase and sale agreement. jçj~at 178—79. Xerox’s brokers stated that“Xerox is prepared to negotiate a Purchase and SaleAgreementwith Keystone Development subject totwo modificationstoyour Proposal,”and, ifKeystone acknowledged acceptance ofthe modifications to its proposal, “[wje can then proceed immediately to draft the Purchase and Sale Agreement for review and execution.” ~ (emphasis

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omitted). The court found that the statements did not create an unconditional commitment: At most, the statement is a manifestation of Xerox’s intention to negotiate with Keystone. There is no objective manifestation by Xeroxofan intentto be bound if Keystone acceptsthe modifications. See Pac. Cascade Corp. v. Nimmer, 25Wn. App. 552, 556, 608 P.2d 266 (1980) (holding an intention to do something “is evidence of a future contractual intent, notthe present contractual intent essential to an operative offer”). On the contrary, the statement evidences an intent not to be bound by expressly referencing the need forfurther negotiations. Arcadian Phosphates, Inc. v. Arcadian Corp., 884 F.2d 69, 72 (2d Cir. 1989) (holding “reference to a binding sales agreement to be completed at some future date” is evidence of a present intent notto be bound). Keystone asks usto implya dutyto continue negotiations until afinal agreement is reached. In fact, Keystone argues that the question before us is notwhetherthe parties agreed to an enforceable dutyto negotiate. Instead, itarguesthequestion is “whetherthe negotiations between Keystone and Xerox had advanced to the point where the lawshould imposeon the partiesa ‘dutyto goforward 

### [.1”Wedecline to create and impose a duty to go forward in the absence of an enforceable contract. No contract was formed between Keystone and Xerox. At best, the circumstances ofthis case presentan implied agreementto agree. 

### j4~ at 179—80 (emphasis omitted). Keystone is not precisely analogous to the factual situation in this case. Unlike the more informal exchange of letters in Keystone, here, the parties signed
a term sheet drafted after two days of settlement negotiations. However, like Keystone, the document expressly references the need forfurther negotiations on certain terms, such as “a reasonable, mutual nondisparagement provision.” Also, although the term sheet contains many specific provisions that are to be included in thefinal settlement agreement, it is silent on a number of important issues. The term sheet does not explicitly state which defendants would be

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responsible for the $200,000 initial payment to Habu and Chinn or what would happen ifthe sale proceeds were insufficientto provide forthe $350,000 payment to Habu and Chinn. It also does not address the disposition ofthe property if it is notsold within twoyears oflisting orwhetherthe $350,000would still be owed. All ofthetimelines within which the parties mustact run from the effective date ofthe final settlement agreement. It is also notable that the order enforcing the term sheet simply directs the parties to enter into a long-form settlement agreement. This seems to indicate thatthe term sheet obligated the parties onlyto engage in further negotiation. Viewed in the light most favorable to Habu and Chinn as the nonmoving parties, the term sheetappears to be an unenforceable agreementto agree. The court erred in finding the term sheet to be a binding and enforceable settlement agreement and granting the motion to enforce the CR 2Aterm sheet. Because wefind theterm sheetto be unenforceable, we need not consider Habu and Chinn’s other assignments of error regarding the court’s refusal to consider extrinsic evidence, the interpretation of paragraph 17 ofthe term sheet, and whether CR 2A prevented enforcement of the agreement. Habu and Chinn also request an award of costs on appeal. ‘A commissioner or clerk of the appellate courtwill award costs to the party that substantially prevails on review, unless the appellate court directs otherwise in its decision terminating review.” RAP 14.2. We will leave this issue in the capable hands of our commissioner or clerk.5

~ Habu and Chinn filed a statementofadditional authoritycontaining a citation to an online news article from the Everett Herald describing the outcome ofa criminal case involving

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Reversed.

WE CONCUR:

some ofthe parties. CHJ moved to strikethe statementofadditional authority. Habu and Chinn filed a responsetothe motion to strike and CHJ filed a reply. Afterconsidering the briefing of both parties, the motion to strike is granted.
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