Court Opinion

ID: 987097
Source: CourtListenerOpinion
Date Created: 2013-07-02 21:58:03.946401+00
Date Added: 2024-06-11T12:00:48.696788
License: Public Domain

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    THE SUPREME COURT OF THE STATE OF WASHINGTON

PATRICK H. KOFMEHL, an individual,           )
                                             )
              Petitioner,                    )                   No. 87395-0
                                             )
      V.                                     )                     En Bane
                                             )
BASELINE LAKE, LLC, a Washington             )
limited liability company,                   )       Filed _ _O_O_N_2_0_20_13_ _
                                             )
               Respondent.                   )
                                             )

      WIGGINS, J.-Patrick H. Kofmehl contracted to buy a piece of land from

Baseline Lake LLC. By the time of closing, the parties disputed the amount of

land covered by the sale agreement. Kofmehl was willing to close the transaction

only if the disputed portion was included in the sale. Baseline was willing to close

the transaction only if the disputed portion was excluded, and so the sale failed to

close. The trial court invalidated the contract for failure to comply with the statute

of frauds and denied specific performance to either party.

      The issue before us is whether Kofmehl is entitled to recover the down

payment he paid before the dispute arose.         Under this court's prior cases, a

buyer in a land sale contract that is unenforceable under the statute of frauds

may not recover restitution if the vendor is ready, willing, and able to perform
No. 87395-0

under the terms of the contract. Schweiter v. Halsey, 57 Wn.2d 707, 711, 359

P.2d 821 (1961 ). The trial court made no finding that either party had breached-

let      alone   repudiated-and      probably       could   not   do   so     without   making

determinations of fact. Therefore, we affirm the Court of Appeals, which reversed

the summary judgment granting restitution.

                           FACTS AND PROCEDURAL HISTORY

    I.    The Transaction

          Baseline acquired title to a property described as "Farm Unit 182, Irrigation

Block 73, Columbia Basin Project, Grant County, Washington, according to the

plat thereof filed November 29, 1951." Clerk's Papers (CP) at 88. Farm Unit 182,

Irrigation Block 73 (FU 182, Block 73), consists of approximately 43 acres. CP at

69.

          Baseline subsequently listed for sale two parcels within FU 182, Block 73

totaling 30.12 acres. CP at 99. The listed property consisted of a parcel of 17.40

acres, priced at $935,000, and a parcel of 12.72 acres, priced at $750,000, and

purchasers could buy either parcel separately or both parcels for $1,650,000. /d.

Baseline intended to retain the northwest 3.93 acres of the property to build a

private school. CP at 69. Baseline's survey map, CP at 74, indicates the 17.40-

acre       parcel,   the   12. 72-acre   parcel,    and     the   3.93-acre    parcel   labeled

"EXCLUDED." 1

1
 The survey map was circulated among the parties prior to the signing of the final
purchase and sale agreement (Agreement). Kofmehl's broker highlighted the map for
Kofmehl to indicate what property was subject to the Agreement.

                                                2
No. 87395-0

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                                                             .tff.fl:f'lU:(>57 Wn.2d at 711. However, the trial

judge reasoned that the parties could not have    perform~d   "as agreed" because

the parties failed to reach a meeting of the minds. The trial judge reasoned that

because neither party was clearly in breach, but both parties were responsible for

the failure of the contract, equity demanded that the parties be returned to their

pre-Agreement state-Kofmehl should recover his money, and Baseline should

recover its land. The trial court awarded Kofmehl $87,842.78 in restitution

(including earnest money, engineering fees, and title fees), as well as attorney

fees and costs. CP at 850-52.

 Ill.   Court of Appeals Proceedings

        Baseline appealed all decisions of the trial court to Division Three of the

Court of Appeals. The Court of Appeals took review and subsequently issued a

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No. 87395-0

partially published opinion, Kofmehl    v.   Baseline Lake, LLC, 167 Wn. App. 677,

275 P.3d 328 (2012).

      The Court of Appeals affirmed the trial court's holding that the Agreement

fell afoul of the statute of frauds, as the parties had not contested that issue. /d.

at 690. Turning to the award of restitution, the Court of Appeals drew on the well-

established Washington principle that

      "a vendee under an agreement for the sale and ·purchase of property
      which does not satisfy the statute of frauds, cannot recover
      payments made upon the purchase price if the vendor has not
      repudiated the contract but is ready, willing, and able to perform in
      accordance therewith, even though the contract is not enforceable
      against the vendee either at law or in equity."

Schweiter, 57 Wn.2d at 711 (quoting Dubke         v.   Kassa, 29 Wn.2d 486, 487, 187

P.2d 611 (1947)).

      Pointing to this court's decision in Johnson        v.   Puget Mill Co., 28 Wash.

515, 68 P. 876 (1902), the Court of Appeals held that the vendor's repudiation or

failure to perform must be established before the purchaser may recover

restitution. Kofmeh/, 167 Wn. App. at 692. That is, "[t]o demonstrate that

Baseline's retention of the earnest money was unjust, [Kofmehl] must prove that

Baseline was unwilling to perform its obligations under the Agreement.

Establishing the meaning of the Agreement is an essential part of his proof." /d.

at 695-96.

       The Court of Appeals then determined that Kofmehl had not carried his

burden. Pointing to the plain language of Kofmehl's offer and the Agreement, the

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No. 87395-0

testimony of the parties' brokers, and other evidence in the record, the Court of

Appeals held that Kofmehl had not established as a matter of law that the

Agreement envisioned the sale of the 3.93 acres, or that Baseline would actually

construct a sewer line to the property. /d. at    696~97.   Therefore, the Court of

Appeals held that summary judgment in Kofmehl's favor was improper.

       Finally, in the unpublished portion of its opinion, the Court of Appeals held

that Baseline was not entitled to summary judgment either. Rejecting Baseline's

claim that the term "accessibility of sewer" had a plain and ordinary meaning, the

Court of Appeals held that it could not determine as a matter of law that Baseline

had been ready, willing, and able to perform on the Agreement. State v. Kofmeh/,

No. 29683-1-111, slip op. (unpublished portion) at 25-26 (Wash. Ct. App. Apr. 12,

2012). The Court of Appeals reversed the trial court's grant of summary

judgment, reversed the trial court's orders of restitution and attorney fees, and

remanded for further proceedings.

       Kofmehl timely filed a petition for review by this Court. We granted review.

Kofmehl   v. Baseline Lake, LLC, 175 Wn.2d 1005, 285 P.3d 885 (2012).
                                    ANALYSIS

  I.   Standard of Review

       This court reviews a grant or denial of summary judgment de novo, and the

appellate court performs the same inquiry as the trial court. Sheikh v. Choe, 156

Wn.2d 441, 447, 128 P.3d 574 (2006). However, the appellate court may

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No. 87395-0

consider only the evidence and issues called to the attention of the trial court.

RAP9.12.

       A question of contract interpretation may be determined as a matter of law

if it does not turn on the "credibility of extrinsic evidence or ... a choice among

reasonable inferences to be drawn from extrinsic evidence." Berg v. Hudesman,

115 Wn.2d 657, 668, 801 P.2d 222 (1990) (quoting RESTATEMENT (SECOND) OF

CONTRACTS § 212 ( 1981)). If interpretation of the contract depends on either,

then the contract must be interpreted by a trier of fact. /d.

       Summary judgment is proper only if there is no genuine issue of material

fact. CR 56(c). A party moving for summary judgment bears the initial burden of

showing the absence of an issue of material fact. Young         v.   Key Pharm., Inc., 112

Wn.2d 216, 225, 770 P.2d 182 (1989). In addition, we construe the facts and

draw all factual inferences in the light most favorable to the nonmoving party.

Jones v. Allstate Ins. Co., 146 Wn.2d 291, 300, 45 P.3d 1068 (2002). Therefore,

in reviewing the trial court's grant of summary judgment to Kofmehl, we construe

the facts in Baseline's favor. However, in reviewing the Court of Appeals' denial of

summary judgment to Baseline, we construe the facts in Kofmehl's favor.

 II.   Kofmehl Cannot Recover if Baseline Was Ready, Willing, and Able To
       Perform on the Agreement

       Established Washington case law does not provide restitution to a buyer

under a sale contract within the statute of frauds unless the seller has repudiated

the contract. In Schweiter, the parties entered into an earnest-money land sale

agreement that did not contain a legal description of the land, although a

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No. 87395-0

sufficient legal description was later circulated to the parties. 57 Wn.2d at 708.

The buyer refused the seller's tender of performance and attempted to rescind

the contract. We held that if the seller has performed "as far as he could by his

own acts," whereas the buyer had "voluntarily and causelessly refused to

proceed," then the buyer has no equitable claim to his earnest money; he may

not benefit from his own breach. /d. at 712. Therefore, we reaffirmed common

law principles we had earlier explored in Dubke:

             The applicable rule is that a vendee under an agreement for
      the sale and purchase of property which does not satisfy the statute
      of frauds, cannot recover payments made upon the purchase price if
      the vendor has not repudiated the contract but is ready, willing, and
      able to perform in accordance therewith, even though the contract is
      not enforcible against the vendee either at law or in equity.

29 Wn.2.d at 487.

      Kofmehl raises two arguments against application of the Schweiter rule

here. First, Kofmehl argues that the Agreement was void under the statute of

frauds and proving that Baseline repudiated the Agreement would improperly

reform the contract and defeat the purpose of the statute of frauds. This theory

disregards the common law principle that a contract made unenforceable by the

statute of frauds is still admissible in evidence for any purpose other than

enforcement. RESTATEMENT (SECOND) OF CONTRACTS § 143; see Costco

Vllho/esa/e Corp.   v. World Wide Licensing Cotp., 78 Wn. App. 637, 648, 898 P.2d
347 (1995). We would not be reforming or enforcing the Agreement in violation of

the statute of frauds; we look to the Agreement to establish whether Baseline

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No. 87395-0

repudiated or was ready, willing, and able to perform. This is a permissible use

under the Restatement (Second) of Contracts. 2

        Second, Kofmehl points to the trial court's statements implying there was

never any agreement in the first instance. Whether or not the parties reached an

enforceable agreement initially, as in Schweiter, the parties received an extrinsic

description of the land prior to closing. This description may not be enough to

make the Agreement enforceable, but it suffices to determine whether or not

Baseline was ready, willing, and able to perform. As in Schweiter, then, our role is

to consider whether Baseline repudiated the Agreement.

        We hold that the Court of Appeals correctly held that the Schweiter rule

applies here: restitution will not be available if Baseline did not repudiate the

Agreement but remained ready, willing, and able to perform. 3 57 Wn.2d at 711.

 Ill.   Kofmehl Bore the Burden of Proving that Baseline Was Not Ready, Willing,
        and Able to Perform

        Kofmehl argues that even if Schweiter applies, it is not his burden to prove

that Baseline repudiated or that Baseline was not ready, willing, or able to

perform. In the past, this court has required a purchaser to prove the vendor's

breach when attempting to recover earnest money on a land sale contract.
2
  See a/so RESTATEMENT (THIRD) OF RESTITUTION AND UNJUST ENRICHMENT § 31 cmt. f
(2011) (an agreement that is unenforceable under the statute of frauds may
nevertheless be evidence establishing unjust enrichment for the purposes of calculating
the proper amount of restitution).
3
  This is not a two-part test; one who repudiates a contract is necessarily not "ready,
willing, and able to perform." See BLACK'S LAW DICTIONARY 1418 (9th ed. 2009) (defining
"repudiate" as "[t]o reject or renounce (a duty or obligation); esp., to indicate an intention
not to perform (a contract)").

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No. 87395-0

Soules v. Cox, 53 Wn.2d 598, 600, 335 P.2d 476 (1959). In Soules, we held that

even assuming the purchaser's reading of the contract was correct, the

purchaser had failed to prove that the vendor breached the agreement. Such

proof, we held, was "essential to entitle appellant to rescind the earnest-money

agreement." /d. at 601.

      Although the contract in Soules did not fall within the statute of frauds, the

Schweiter test involves essentially the same inquiry. Schweiter held that the

buyer cannot recover restitution if the vendor has not repudiated the contract; this

means that as in Soules, it is necessary to establish the vendor's repudiation

before restitution will be available. Kofmehl has not provided a reason why we

should allocate the burden of proof differently than we did in Soules. Rather,

whenever a contract is invalidated by force of statute, the restitution analysis

must be keyed to the policy goals of that statute. RESTATEMENT (THIRD) OF

RESTITUTION AND UNJUST ENRICHMENT§ 32 (2011 ). In Washington, the policy goal

of the statute of frauds is to protect the vendor-that is, Baseline. Home Realty

Lynnwood, Inc.   v. Walsh, 146 Wn. App. 231, 240, 189 P.3d 253 (2008) (quoting
73 AM. JUR. 2D Statute of Frauds § 450 (2001 )). In keeping with that policy, we

require Kofmehl to show something more than unenforceability of the Agreement

under the statute of frauds if he is to gain restitution.

      Placing the burden of proof on Kofmehl would also be consistent with

practice in other jurisdictions. California, for example, demands "pleading or proof

that the [sellers] have on their part violated any of the terms of said agreement,"

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No. 87395-0

Walbridge     v. Richards, 212 Cal. 408, 413, 298 P. 971 (1931), as well as a

showing that the buyer actually performed (that is, tendered the balance of the

purchase price), Laffey v. Kaufman, 134 Cal. 391, 393, 66 P. 471 (1901 ).

Minnesota has adopted a similar rule-if buyers fail to plead on the face of the

complaint that they tendered performance, there is no cause of action and the

complaint should be dismissed. Sennett v. Shehan, 27 Minn. 328, 330, 7 N.W.

266 (1880). The rationale of this rule is that a buyer voluntarily pays earnest

money as consideration for the agreement to convey the land. Laffey, 134 Cal. at

393. So long as the contract is not unlawful or against public policy, and the seller

is not at fault, the buyer has received what he paid for. /d. Similarly, here Kofmehl

paid the earnest money as consideration supporting the Agreement. On the force

of that Agreement, Baseline removed the property from the market and rejected a

competing offer to purchase the property for $1.625 million. The Agreement was

not unlawful or against public policy. Therefore, to get back his earnest money,

Kofmehl must show that he did not receive what he paid for, that is, the promise

to sell him the land.

IV.   There Is a Genuine Issue of Material Fact as to whether Kofmehl Is
      Entitled to Restitution

       Kofmehl must show that Baseline was not ready, willing, and able to

perform on the Agreement. He does not contest that Baseline was ready, willing,

and able to perform on the Agreement as Baseline saw it. But to prevail on

summary judgment, Kofmehl must prove that his interpretation of the Agreement

is correct. He has failed to do so. Rather, construing the facts in the light most

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No. 87395-0

favorable to Baseline-as we must do on appeal of a summary judgment against

Baseline-leads to the conclusion that Kofmehl, not Baseline, breached the

Agreement.

   A finder of fact could find that Baseline tendered the property contemplated by
   the Agreement

   1. The Agreement provided for the sale of 30.12 acres, which is what
      Baseline tendered

       Kofmehl's main complaint with the closing documents was that the legal

description was based on the short plat filed after the parties entered into the

purchase and sale agreement, in contrast to the legal description contained in

the Agreement. Kofmehl relies on Park v. McCoy, 121 Wash. 189, 192, 208 P.

1098 (1922), where we held that the buyer could rescind an earnest-money

contract that contained a different legal description of the property than the prior

earnest-money receipt. We held that the buyer "had a right to rely upon the

description given in the earnest-money receipt ... " and that the seller's failure to

tender the property described in that receipt entitled the buyer to rescission and

restitution. /d.

       Kofmehl interprets Park to mean that whenever the legal description in a

seller's tender differs from an earlier promised legal description, the buyer is

automatically entitled to rescission and restitution. But in Park, we relied on the

fact that the land actually tendered by the contract was a lesser amount than the

buyer had been promised in the earnest-money receipt. /d. The record does not

clearly establish that this is the case here. Drawing all inferences in Baseline's

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No. 87395-0

favor, Kofmehl's theory that the Agreement promised him the additional 3.93

acres founders upon the plain language of the Agreement. Both the offer and the

Agreement provided for "30.12 acres" to be conveyed. This is the size of the "Lot

1" that Baseline offered to convey and that Kofmehl saw on Baseline's

preliminary map prior to signing the Agreement. Nothing on the face of the

Agreement suggests any intention to buy or sell 34 acres.

      Kofmehl also argued to the trial court that he took the language "all

included inside FU 182, Block 73 to mean that he was purchasing the entirety of

Block 73. Baseline, on the other hand, understood the language to mean that all

30.12 acres were contained inside FU 182, Block 73. Baseline's reading of the

Agreement is consistent with the original listing, which listed FU 182, Block 73 in

the section "Farm Property Informative Data" under "How to get there." In other

words, Baseline meant "Approximately 30.12 acres" as the actual description of

the land and "All included inside of FU 182, Block 73" as an explanatory phrase.

This may reflect sloppy draftsmanship, but it does not require a finder of fact to

find that Baseline meant to sell the entirety of Block 73. Rather, if the Agreement

had been intended to sell all of Block 73, it would not have described the property

to be sold as 30.12 acres. Block 73 is 43 acres in area, not 30.12.

      In the summary judgment proceedings, Kofmehl also relied on his addition

of $150,000 to the purchase price in his second offer, and the removal of the

language specifically excluding the 3.93 acres, between his initial offer and the

final Agreement. He suggests that between the offer and the Agreement, he

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No. 87395-0

negotiated for the purchase of the 3.93 acres for $150,000. But it makes little

sense for Baseline to sell 3.93 acres for $150,000 (approximately $38,000 per

acre) when it had previously rejected Baseline's offer to purchase 30 acres for

$1.5 million ($50,000 per acre).

      Reading the facts in the light most favorable to Baseline, the Agreement-

whatever its other flaws-clearly indicated that Kofmehl was to purchase 30.12

acres, and Kofmehl could not complain when the closing documents tendered

the only combination of parcels that exactly totaled 30.12 acres.

   2. The record does not clearly establish that Baseline failed to ensure the
      "accessibility of sewer"

      Kofmehl complains that at the time of closing, Baseline had not complied

with the term "accessibility of sewer" in the Agreement. The word "accessibility"

does not have a plain and ordinary meaning. However, the dictionary defines it

as "the quality or state of being [capable of being reached or easily approached]."

WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY       11 (2002).

      According to the city of Quincy, there were "easements in place to provide

for sewer to the subject property." CP at 335. The sewer was legally capable of

being reached through these easements. Kofmehl did not outright deny the

existence of these easements but only complained that they were "not new, fresh

and recorded and exact." CP at 155.

      Reading the facts in the light most favorable to Baseline, we must credit

the city's assertion that the easements existed and allowed for access to the

sewer-notwithstanding Kofmehl's misgivings. In addition, Kofmehl discussed

                                        17
No. 87395-0

with his broker his plans for constructing the sewer line himself. This belies his

assertion that he meant the Agreement to require Baseline to construct the

sewer. Kofmehl has not foreclosed all genuine issues of material fact regarding

Baseline's compliance with the sewer provision.

      Reading the facts in the light most favorable to Baseline, Kofmehl had no

cause to refuse to sign the closing documents, and his refusal constituted a

breach of the Agreement. There are genuine issues of material fact as to

Kofmehl's right to restitution, and the Court of Appeals correctly reversed the trial

court's grant of summary judgment in his favor.

      In order to prevail on remand, Kofmehl must satisfy the Schweiter test by

proving both the validity of his interpretation of the Agreement and that Baseline

repudiated that Agreement, or else revive and prevail on his alternative

arguments that there was no meeting of the minds or that there was a mutual

mistake of fact.

 V.   Baseline Is Not Entitled to Summary Judgment Granting Specific
      Performance of the Agreement

      We now turn to Baseline's request for summary judgment. The Court of

Appeals affirmed the trial court's denial of summary judgment for Baseline,

holding that "Baseline's evidence, while substantial, does not clearly establish the

absence of any genuine issue of material fact." Kofmehl, slip op. (unpublished

portion) at 26. The Court of Appeals was correct. Drawing all factual inferences in

Kofmehl's favor, Baseline has not established beyond dispute that Kofmehl was

in breach.

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No. 87395-0

      As we discussed above, the evidence points strongly to Baseline's reading

of the Agreement to cover only 30.12 acres of land-but the evidence is not so

strong as to foreclose all other interpretations. For instance, the $150,000

increase in the purchase price between Kofmehl's initial offer and the final

Agreement might be explained by the addition of more land to the Agreement-

although as discussed previously, four acres at $150,000 is significantly cheaper

than the $50,000 per acre rate previously offered by Kofmehl and rejected by

Baseline.     In   addition,   Kofmehl's    contemporaneous      profit   projections

contemplated a "net usable" area of 34.3 acres. CP at 378. While Kofmehl's

interpretation of the Agreement to encompass the 3.93 acres is unlikely, it is not

impossible on the record before us. A finder of fact must determine the credibility

of the competing evidence presented by Kofmehl and Baseline. See Berg, 115

Wn.2d at 668.

      As for the sewer, Baseline argues that the term of the Agreement

concerning "Accessibility of city sewer," CP at 75, has a plain and ordinary

meaning that can be construed as a matter of law. In support of this assertion,

Baseline points to our holding in Goedecke v. Viking /nv. Corp., 70 Wn.2d 504,

424 P.2d 307 (1967). There, this court considered whether a contract term

providing "'that public sewers are available to property"' had been fulfilled. /d. at

505. We held that it had, through a public road running from the property to a

sewer facility. /d. at 506. But in that case, we did not interpret the term

"availability." Rather, the parties conceded that the presence of the road would

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No. 87395-0

satisfy the availability condition and disputed whether the road actually existed.

As the Court of Appeals correctly held, we did not hold in Goedecke that an

easement to the sewer always makes sewer "available" or "accessible" to a

property. More fact-finding is necessary to determine the objective intent of the

parties in stipulating for the "accessibility" of the sewer.

VI.   Attorney Fees

      The Agreement provides that "[i]f Purchaser, Seller, or any Agent or Broker

included in this transaction is involved in any dispute relating to any aspect of this

transaction or this Agreement, any prevailing party shall recover their reasonable

attorneys' fees and costs." CP at 77. Because there are still genuine issues of

material fact, neither party has prevailed yet and we decline to award attorney

fees. See Schroeder v. Excelsior Mgmt. Grp., LLC, 177 Wn.2d 94, 115 n. 15, 297

P.3d 677 (2013). The parties may renew their motions for attorney fees upon

remand.

                                    CONCLUSION

       The record leaves genuine issues of material fact as to the meaning of the

Agreement and to which party breached the Agreement. Thus, neither party is

entitled to summary judgment on this record. We affirm the Court of Appeals and

remand this case for further proceedings consistent with this opinion.

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No. 87395-0

      WE CONCUR.

                   21