Court Opinion

ID: 4375876
Source: CourtListenerOpinion
Date Created: 2019-03-11 22:44:45.045533+00
Date Added: 2024-06-11T14:21:53.063476
License: Public Domain

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

HARTY INVESTMENT GROUP, LLC,
a Washington limited liability company,    )    No. 77267-8-I

                        Respondent,        )    DIVISION ONE
                                           )
              v.
                                           )
CHG SF, LLC, a Washington limited          )
liability company,                         )    UNPUBLISHED OPINION
                                           )
                        Appellant.         )    FILED: March 11,2019

       SMITH, J.   —   CHG SF LLC (CHG) appeals the trial court’s grant of summary

judgment in favor of Harty Investment Group LLC (Harty Group) and the court’s

dismissal of CHG’s counterclaims against Harty Group. Because CHG failed to

raise a genuine issue of material fact regarding whether it anticipatorily

repudiated its agreement with Harty Group, summary judgment was proper.

Therefore, we affirm.

                                        FACTS

       Harty Group and CHG are companies engaged in buying, developing, and

selling real property. In March 2016, Harty Group and CHG entered into a real

estate purchase and sale agreement (PSA) whereby CHG agreed to purchase

certain property located in Kirkland (Property) from Harty Group. The purchase

price for the Property was $2,816,000, and CHG made an earnest money deposit
No. 77267-8-1/2

of $140,800. The earnest money deposit was secured by a deed of trust

encumbering the Property.

       The PSA contained an “Engineering Approval” provision that provides, in

relevant part:

       As used herein, “Engineering Approval” means that (a) the
       Permitting Jurisdiction has approved Seller’s engineering and
       construction plans for its intended residential development on the
       Property, and (b) all appeal periods, if any, have expired or any
       appeals have been successfully concluded, as the case may be.
       Seller shall use diligent and good faith efforts to obtain Engineering
       Approval, at Seller’s sole cost and expense as soon as reasonably
       possible. If Seller is unable to obtain Engineering Approval by
       Outside Closing Date, unless Purchaser waives the requirement for
       Engineering Approval in writing, this Agreement shall terminate,
       and upon such termination any and all Earnest Money previously
       deposited     .shall be returned to Purchaser. Before submitting
                         .   .

       any plans, modifications, or appeals or other materials for
       Engineering Approval to the Permitting Jurisdiction, Seller shall
       submit such applications or materials to Purchaser for Purchaser’s
       prior written approval, which approval shall not be unreasonably
       withheld and shall be deemed granted if Purchaser fails to respond
       with written notice of disapproval within 5 business days after
       receipt of such applications or material from Seller.th]

The “Permitting Jurisdiction” was the city of Kirkland (City), and the “Outside

Closing Date” was December 31, 2016.

       It is undisputed that one of the components of Engineering Approval was

the City’s approval of a land surface modification (LSM) permit to develop the

Property. Harty Group applied for the LSM permit, and on October 11, 2016, the

City provided comments to the engineering plans for the LSM permit. On

October 25, 2016, Harty Group’s principal, Luay Joudeh, met with Michael

Lorenz and Aron Golden of CHG to discuss the City’s comments. On October

       1   (Bold in original.)

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No. 77267-8-1/3

27, 2016, Joudeh sent Lorenz and Golden an e-mail providing, in relevant part:

       Gentlemen

       We are submitting revised LSM plans and reports to City for final
       review. Once the LSM is approved, I will have met the condition of
       closing.

Golden responded via e-mail that “[w]e want to be sure what you resubmit will

work for us.” He mentioned in his e-mail concerns regarding the revised plans

and expressed that “[i]t would be good to go over items prior to resubmittal.”

Joudeh e-mailed the revised LSM plans to Golden and Lorenz on October 27,

2016, and Golden confirmed receipt.

      On November 9, 2016, Lorenz e-mailed Joudeh as follows:

      Luay

      Bad news. We have completed our estimates for the modified
      [LSMJ plans that you have produced based on the City’s input.

      The increase in combined costs has exceeded our original
      estimates by $338,045.

      This is clearly a significant impact.

      We have held prices on the homes as high as we could be [sic] are
      not able to cover the cost impacts.

      I propose that we reduce the land price to $2,475,000 and keep
      going. We will need to execute on one extension for the Closing.

      If this doesn’t work then we’ll have to terminate the transaction
      finding the Engineering Approval Contingency unsatisfactory.

      I’m really surprised that the City has layered so many expensive
      requirements on this small project it’s tough to spread that cost
                                              —

      amongst the 11 lots.

      I’ll call you to go over this.

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No. 77267-8-1/4

       Harty Group declined to reduce the price for the Property, and the sale of

the Property ultimately did not close. CHG demanded a return of its earnest

money and in January 2017 declared a default under the deed of trust securing

the earnest money deposit. On February 14, 2017, Harty Group sued for breach

of contract and to enjoin CHG’s foreclosure of the deed of trust. CHG

counterclaimed for breach of contract and foreclosure. Harty Group moved for

summary judgment, arguing that Lorenz’s November 9, 2016, e-mail constituted

an anticipatory repudiation of the PSA. The trial court granted Harty Group’s

motion and summarily dismissed CHG’s counterclaims. CHG appeals.

                                  DISCUSSION

                               Summary Judgment

       CHG argues that the trial court erred by summarily concluding that

Lorenz’s November 9, 2016, e-mail constituted an anticipatory repudiation of the

PSA.2 We disagree.

      We review summary judgment orders de novo, viewing all evidence and

reasonable inferences in the light most favorable to the nonmoving party. Keck

v. Collins, 184 Wash. 2d 358, 370, 357 P.3d 1080 (2015). “[S}ummary judgment is

appropriate where there is ‘no genuine issue as to any material fact and   .   .   .   the

moving party is entitled to a judgment as a matter of law.” Elcon Constr., Inc. v.

E. Wash. Univ., 174 Wash. 2d 157, 164, 273 P.3d 965 (2012) (second alteration in

original) (quoting CR 56(c)). Once the moving party shows there are no genuine

      2 The trial court did not enter written conclusions. But anticipatory
repudiation was the only theory argued in Harty Group’s motion for summary
judgment.
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No. 77267-8-1/5

issues of material fact, “[t]he nonmoving party may not rely on speculation,

argumentative assertions, ‘or in having its affidavits considered at face value; for

after the moving party submits adequate affidavits, the nonmoving party must set

forth specific facts that sufficiently rebut the moving party’s contentions and

disclose that a genuine issue as to a material fact exists.” Becker v. Wash. State

Univ., 165Wn. App. 235, 245-46, 266 P.3d 893 (2011) (quoting Seven Gables

Corp. v. MGM/UAEntm’tCo., 106 Wn.2d 1,13,721 P.2d 1(1986)).

       An anticipatory repudiation occurs “when one of the parties to a bilateral

contract either expressly or impliedly repudiates the contract prior to the time of

performance.” Wallace Real Estate mv., Inc. v. Groves, 124 Wash. 2d 881, 898,

881 P.2d 1010 (1994). “A party’s intent not to perform may not be implied from

doubtful and indefinite statements that performance may or may not take place.”

Wallace Real Estate, 124 Wash. 2d at 898. “Rather, an anticipatory breach is a

‘positive statement or action by the promisor indicating distinctly and

unequivocally that he either will not or cannot substantially perform any of his

contractual obligations.” Wallace Real Estate, 124 Wash. 2d at 898 (internal

quotation marks omitted) (quoting Olsen Media v. Energy Scis., Inc., 32 Wash. App.
579, 585, 648 P.2d 493 (1982)). An anticipatory repudiation occurs when one

party states its intention not to perform except under additional terms that go

beyond the contract. Highlands Plaza, Inc. v. Viking Inv. Corp., 72 Wash. 2d 865,

878, 435 P.2d 669 (1967) (concluding that party anticipatorily breached contract

by demanding other party’s performance before it was due); see ~ 17A AM.

JUR. 2D Contracts   § 695 at 676 (2016) (“Language that amounts to a statement of

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No. 77267-8-1/6

intention that one will not perform except on conditions that go beyond the

contract, or unless the other party meets additional terms, constitutes a

repudiation.”); RESTATEMENT (SECOND) OF CONTRACTS        § 250 cmt. b at 273 (AM.
LAW INST. 1981) (“[Ljanguage that under a fair reading ‘amounts to a statement of

intention not to perform except on conditions which go beyond the contract’

constitutes a repudiation.”) (quoting U.C.C.   § 2-610 cmt. 2 (1978)). Although
anticipatory repudiation is a question of fact, it can be decided on summary

judgment “if, taking all evidence in the light most favorable to the non-moving

party, reasonable minds can reach only one conclusion.” Alaska Pac. Trading

Co. v. Eagon Forest Prods., Inc., 85 Wash. App. 354, 365, 933 P.2d 417 (1997).

       Here, Lorenz’s November 9, 2016, e-mail to Joudeh unequivocally stated

that CHG planned to terminate the PSA unless Harty Group agreed to lower the

purchase price from $2,816,000 to $2,475,000, a reduction of $341,000. And

although Lorenz indicated in his e-mail to Joudeh that CHG would terminate by

“finding the Engineering Approval Contingency unsatisfactory,” CHG had no right

to terminate under the Engineering Approval provision or to deem that condition

unsatisfactory. Rather, the fulfillment of the Engineering Approval condition

depended solely on the City’s—not CHG’s—approval of the relevant engineering

and construction plans. In short, Lorenz’s November 9, 2016, e-mail was an

unambiguous statement that CHG would wrongfully terminate the transaction

unless Harty Group agreed to modify a material term of the PSA, the purchase

price. Therefore, reasonable minds could reach but one conclusion: CHG

repudiated by stating its intent not to perform unless Harty Group agreed to a

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No. 77267-8-1/7

condition that went beyond the contract. For these reasons, summary judgment

was proper.

       CHG argues that the trial court nonetheless erred by failing to address

whether Harty Group completed its performance under the Engineering Approval

provision. Specifically, CHG cites Wallace Real Estate for the proposition that

Harty Group was required to establish its own performance. But CHG’s reliance

on Wallace Real Estate is misplaced. In that case, the court did state the general

rule that ‘[i]f a contract requires performance by both parties, the party claiming

nonperformance of the other must establish as a matter of fact the party’s own

performance.” Wallace Real Estate, 124 Wash. 2d at 897. But the court then

concluded that the buyer in that case anticipatorily repudiated by sending the

sellers a letter indicating he would not be able to close on the agreed-upon date

and requesting an extension. Wallace Real Estate, 124 Wash. 2d at 898.

Accordingly, the sellers’ performance of their contractual obligations was

excused. Wallace Real Estate, 124 Wash. 2d at 899. If anything, Wallace Real

Estate supports Harty Group and confirms both that (a) CHG’s request for a price

reduction constituted repudiation, and (b) because CHG repudiated, Harty

Group’s performance was excused.

       Puqet Sound Service Corporation v. Bush, 45 Wash. App. 312, 724 P.2d
1127 (1986), is also instructive here and confirms that Harty Group’s

performance was excused because CHG repudiated when Harty Group still had

time to perform. In Puqet Sound, Robert and Lee Bush entered into an

agreement to purchase a condominium with private moorage from Puget Sound

                                         7
No. 77267-8-1/8

Service Corporation (Puget Sound). Puget Sound, 45 Wash. App. at 314. Shortly

before the closing, the Bushes tried to moor their boat in their assigned slip and

experienced difficulty because the slip was not as large as Puget Sound had

represented itto be. Puget Sound, 45 Wash. App. at 315. The Bushes advised

Puget Sound of the issue, and Puget Sound responded that the problem would

be remedied. Puget Sound, 45 Wash. App. at 315. But the Bushes did not believe

that the slip would be made to conform, sent a letter to Puget Sound indicating

that they were rescinding the transaction, and demanded the return of their

earnest money. Puget Sound, 45 Wash. App. at 315.

          Puget Sound sued the Bushes for breach of contract, and the trial court

concluded that the Bushes improperly rescinded the agreement. Puget Sound,
45 Wash. App. at 315. But the court nonetheless dismissed Puget Sound’s claim,

concluding that Puget Sound had failed to demonstrate that a condition

precedent to closing would have been satisfied—namely, that Puget Sound’s

owner would provide the Bushes with financing for the purchase on specified

terms. Puget Sound, 45 Wash. App. at 315-16. The court noted that although the

Bushes’ loan application was approved, the terms of the financing were not

consistent with the terms specified in the agreement. Puget Sound, 45 Wash. App.

at 316.

          We reversed, reasoning: “Since Puget Sound still had time to comply with

the condition precedent, the Bushes’ action excused Puget Sound’s

performance.” Puget Sound, 45 Wash. App. at 318. We explained:

                 The Bushes’ repudiation excused Puget Sound from
          performing the condition precedent of acquiring the agreed

                                          8
No. 77267-8-1/9

       financing. It was not necessary for Puget Sound to prove as part of
       its cause of action that it would have satisfied the condition
       precedent prior to closing. The burden of proof was on the Bushes
       to demonstrate that, despite their improper repudiation, the
       condition precedent of providing the required financing would not
       have been satisfied. The trial court erroneously placed the burden
       of proof on [Puget Sound].

Puqet Sound, 45 Wash. App. at 319 (emphasis added) (citation omitted).

       Here, as in Puciet Sound, Harty Group still had time to comply with the

Engineering Approval provision when CHG repudiated. Specifically, it is

undisputed that a 30-day appeal period applies to the relevant City approvals

under the Engineering Approval provision. And “Engineering Approval” means

not only that the City has approved the relevant engineering and construction

plans but also that all appeal periods have expired. Accordingly, to satisfy

Engineering Approval by December 31, 2016, Harty Group had until December

1,2016, at the latest to obtain the City’s approval of the relevant plans.

Nonetheless, Lorenz sent his repudiatory e-mail to Joudeh on November 9,

2016—a full three weeks earlier. Here, as in Puqet Sound, CHG’s premature

repudiation excused Harty Group from obtaining Engineering Approval.

Therefore, we are not persuaded by CHG’s argument that Harty Group was

required to establish its own performance.

      CHG attempts to distinguish Puciet Sound by arguing that CHG construed

Joudeh’s October 27, 2016, e-mail as a refusal to complete a required storm

water vault design for the Property and that, unlike Puget Sound, Harty Group did

not provide any assurances that it would complete its performance. But in Puqet

Sound, the Bushes advised Puget Sound of the problem with the slip before

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No. 77267-8-1/10

repudiating on that basis. Puqet Sound, 45 Wash. App. at 315, 317. By contrast,

CHG does not point to any evidence that it advised Harty Group, before

repudiating, that it construed Joudeh’s e-mail as a refusal to provide the vault

design, or that CHG considered that refusal a breach of the PSA. Thus, unlike

Puget Sound, Harty Group had no occasion to offer any assurances. CHG’s

argument is unpersuasive.

       CHG next argues that it overcame any “presumption” of performance

under Puget Sound by demonstrating that Harty Group “did not, and could not,

fully perform its end of the bargain.” But CHG does not point to any evidence

that creates a genuine issue of material fact on this matter. CHG first points to

evidence of a dispute about whether a storm water vault design was part of the

Engineering Approval requirement. We need not resolve that dispute because

even assuming that the vault design was part of the requirement, CHG has not

raised a genuine issue of material fact as to whether Harty Group would have

timely obtained Engineering Approval if CHG had not repudiated. Specifically,

CHG, which under Puqet Sound bears the burden of proof on this issue, has not

pointed to any evidence that rebuts Joudeh’s declaration testimony that the

engineering design for a storm water vault costs about $4,000 to $5,000 and can

be obtained in a week or less. CHG points out that the vault design ultimately

was not completed until December 9, 2016, but that fact alone does not create a

genuine issue of material fact as to whether the design would have been timely

completed had CHG not repudiated. Furthermore, CHG has not cited any

evidence from which the court could make a reasonable inference that had CHG

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No. 77267-8-1/1 1

indicated to Harty Group before repudiating that CHG considered Joudeh’s

October 27, 2016, e-mail a breach of the PSA, Harty Group would have insisted

on not providing the vault design.

       CHG also points to the fact that Harty Group did not obtain a right-of-way

permit from Puget Sound Energy or apply for a right-of-use permit from

Northshore Utility District and did not take action on these claimed deficiencies

until it was too late to meet the deadline for Engineering Approval. But the

Engineering Approval provision does not require Harty Group to obtain approvals

from utilities—it only requires approval from the “Permitting Jurisdiction,” which is

the City.3 In short, CHG has not cited any evidence in the record that creates a

genuine issue of material fact as to whether, absent CHG’s repudiation, Harty

Group would have timely obtained Engineering Approval. Accordingly, CHG’s

argument that it has overcome the “presumption” that Harty Group could have

performed is unpersuasive.

       Relying on an excerpt from American Jurisprudence 2d, CHG next argues

that Joudeh’s e-mail constituted a breach of the PSA because his e-mail

indicated that Harty Group was refusing to provide a storm water vault design.

But the excerpted section of American Jurisprudence 2d does not help CHG

here. It provides:

       [W]here the parties differ as to the interpretation of a contract, a
       demand that the contract be performed according to one party’s
       interpretation does not constitute a repudiation, unless the demand

        ~ By way of contrast, “Preliminary Plat Approval” requires the approval of
the Permitting Jurisdiction “and all other governmental agencies or utilities with
jurisdiction over the Property.”
                                         11
No. 77267-8-1/12

       is accompanied by a clear expression of the intent not to perform
       under any other interpretation.

17A AM. JUR. 2D Contracts   § 695 at 676 (emphasis added). Joudeh’s October
27, 2016, e-mail merely states that “[o]nce the LSM is approved, I will have met

the condition of closing.” This statement was not accompanied by any clear

expression of an intent not to perform under any interpretation of the PSA other

than an interpretation under which the vault design was excluded from

Engineering Approval. CHG’s argument is not persuasive.

       CHG also asserts that Lorenz’s November 9, 2016, e-mail was merely an

exercise of CHG’s contractual rights under the Engineering Approval provision.

But CHG does not specify what right it refers to, and as discussed, the

Engineering Approval provision did not give CHG a right to terminate the PSA.

CHG did have a right under that provision to approve the LSM plans before Harty

Group submitted them to the City. But CHG’s argument that Lorenz’s November

9, 2016, e-mail was intended to communicate CHG’s disapproval of the LSM

plans is not persuasive because Lorenz’s e-mail does not contain any statement

that could reasonably be construed as a notice of disapproval of the LSM plans.

       Furthermore, by November 9, 2016, the LSM plans were already deemed

approved under the Engineering Approval provision. Specifically, that provision

states materials are deemed approved by CHG if CHG fails to respond with

written notice of disapproval within five business days after receipt. CHG does

not dispute that it received the LSM plans from Joudeh on October 27, 2016.

And although CHG argues that plans were later uploaded to a Dropbox account

that Harty Group set up for the transaction, CHG does not point to any evidence

                                       12
No. 77267-8-1113

in the record to rebut Joudeh’s testimony that the plans he uploaded to Dropbox

a few days later were the same plans that CHG acknowledged receiving on

October 27.~ Because CHG received the plans on October 27, Lorenz’s

November 9 e-mail was sent after the five-business-day objection window.

Again, CHG’s argument that Lorenz’s November 9, 2016, e-mail was simply an

exercise of its contractual rights is unpersuasive.

       CHG next contends that Lorenz’s November 9, 2016, e-mail was ‘not so

‘positive,’ ‘unequivocal,’ or ‘certain’ that CHG would not perform.” CHG relies on

the following excerpt from American Jurisprudence 2d to support its argument:

              It must be reasonably certain that the promisor will not
      perform in a timely manner. A party’s intent not to perform may not
      be implied from doubiful or indefinite statements whether
      performance may take place.      .   .Thus, a threat to abandon
                                               .

      contract obligations or a mere assertion that one will be unable or
      will refuse to perform is not sufficient.

17AAM. JUR. 2D Contracts    § 692 at 674 (2016) (footnotes omitted). But another
section of American Jurisprudence 2d more specifically addresses the scenario

where, as here, the claim of repudiation is based on a demand for modifications

to the agreement:

             An anticipatory breach must be an unequivocal repudiation;
      thus, a mere request for negotiations to change the terms of the
      contract or to cancel it is not sufficient. To constitute an
      anticipatory breach based upon a request for a modification of
      terms, the request must be coupled with an absolute refusal to
      perform unless the request is granted.

17A AM. JuR. 2D Contracts   § 696 at 677 (2016) (emphasis added) (footnotes

      ~ For this reason, any dispute about whether the Dropbox account was
updated on November 1 or November 2 is immaterial.
                                               13
No. 77267-8-1114

omitted).

       Here, CHG not only requested to negotiate a price reduction for the

Property but also coupled its proposed price reduction with an unequivocal

statement that it would terminate the PSA unless Harty Group agreed to the

reduction. This was a repudiation, and CHG’s arguments that Lorenz was

merely making an “offer” or “proposal” are not persuasive.

       As a final matter, CHG argues that this court should not limit its focus to

Lorenz’s November 9, 2016, e-mail. CHG urges us to consider the

communications that followed that e-mail, arguing that the court must consider

this “surrounding background” in determining whether CHG repudiated.

Specifically, CHG points to a December 12, 2016, letter from CHG’s counsel to

Harty Group’s counsel listing various approvals that remained outstanding. CHG

also refers to Lorenz’s declaration testimony that “CHG viewed Harty’s assertion

that it had fully satisfied its contractual obligations as a breach,” and that he and

Joudeh had a call on November 9, 2016, but ‘[tb my dismay, Mr. Joudeh was

unwilling to negotiate a reasonable business solution to move forward in light of

Harty’s failure to provide all components of the engineering and construction

plans per [the Engineering Approval provision].” But Lorenz’s November 9, 2016,

e-mail was unambiguous: Developing the Property would cost more than CHG

anticipated, and CHG would terminate unless Harty Group agreed to reduce the

purchase price. CHG’s after-the-fact assertion through counsel that Harty Group

breached the Engineering Approval provision does not create a genuine issue of

material fact, see Becker, 165 Wash. App. at 245-46 (party may not rely on

                                          14
No. 77267-8-1/15

argumentative assertions to defeat summary judgment), and neither does the

fact that Harty Group and its counsel engaged in efforts to salvage the

transaction after November 9. And finally, Lorenz’s subjective but

uncommunicated belief that his e-mail was a “reasonable business solution” to a

perceived breach does not create a genuine issue of material fact, particularly

where CHG has pointed to no evidence in the record that CHG told Harty Group,

before repudiating, that it believed Harty Group was in breach based on Joudeh’s

October 27, 2016, e-mail. See 17A AM. JUR. 2D Contracts       § 692 at 673-74
(promisor’s uncommunicated subjective intent not relevant to whether repudiation

occurred).

       Simply put, where CHG unambiguously cited increased costs as its sole

reason for terminating, it cannot create a genuine issue of material fact by

attempting to justify that termination after the fact by arguing that Harty Group

breached. Pearcev. Puqet Sound Broad. Co., 170 Wash. 472,481,16 P.2d 843

(1932) (“{W}hen one party terminates a contract for an express reason, he cannot

thereafter sustain his action by specifying another breach not referred to at the

time, but which, if referred to, could have been cured.”).

                             Attorney Fees and Costs

       Harty Group requests attorney fees and costs on appeal under the PSA,

which provides: “In any litigation or other proceeding arising out of this

Agreement, the substantially prevailing party shall be entitled to an award of its

reasonable attorneys’ fees and other costs incurred therein.” Where a contract

“specifically provides that attorneys’ fees and costs, which are incurred to enforce

                                         15
No. 77267-8-1/16

the provisions of such contract.         .   .   shall be awarded to one of the parties, the

prevailing party.   .   .   shall be entitled to reasonable attorneys’ fees in addition to

costs and necessary disbursements.” RCW 4.84.330. This entitlement applies

on appeal. Reeves v. McClain, 56 Wash. App. 301, 311 783 P.2d 606 (1989).

Because Harty Group is the prevailing party on appeal, we award Harty Group its

reasonable attorney fees and costs on appeal subject to its compliance with

RAP 18.1(d).

      We affirm.

WE CONCUR:

                                                                                     a

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