Court Opinion

ID: 4635843
Source: CourtListenerOpinion
Date Created: 2020-11-24 19:09:39.467454+00
Date Added: 2024-06-11T07:58:26.681413
License: Public Domain

Filed
                                                                                          Washington State
                                                                                          Court of Appeals
                                                                                           Division Two

                                                                                         November 24, 2020

    IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

                                          DIVISION II
 RODNEY R. PARR and LINDA J. PARR,                                    No. 53640-4-II
 husband and wife,

                                Appellants,

         v.

 HASELWOOD      IMPORTS,    INC., a                              PUBLISHED OPINION
 Washington    corporation;   WILER
 MANAGEMENT TRUST; HASELWOOD
 FAMILY TRUST,

                                Respondents.

       MELNICK, J. — Rodney and Linda Parr appeal the trial court’s summary judgment dismissal

of their breach of contract and accounting claims against Wiler Management Trust and Haselwood

Family Trust (hereafter collectively Haselwood).

       The Parrs sold all of their shares in their Volkswagen dealership to Haselwood. The Parrs

argue that pursuant to the purchase and sales agreement (PSA), money the dealership received and

money it is owed from the settlement of a class action lawsuit against Volkswagen of America

(Volkswagen) belong to the Parrs. The Parrs also ask us to reverse the trial court’s grant of attorney

fees and costs to Haselwood. We conclude that the settlement payments belong to Haselwood

pursuant to the PSA, and we affirm.
53640-4-II

                                               FACTS

       On August 5, 2015, the Parrs entered into a PSA with Haselwood to sell all of their shares

in a Volkswagen dealership. The sale allowed the dealership to operate continuously without

interruption through the closing date. The purchase price consisted of both the tangible assets of

the business and the goodwill associated with the business. Because the dealership continued to

operate throughout the sale and closing period, the parties agreed to adjust the sale price to account

for income and expenses that existed prior to closing but would not come to or be paid by the

business until after closing. The PSA contained a provision to govern the allocation of the income

and expense:

       10.7.2 The Parties recognize and agree that at Closing there will be items of income
       and expense which will not have been received by and/or posted in the accounting
       records of the Dealership[]. . . . Examples of these may be contracts in transit,
       dealer rebates, factory holdbacks, accounts receivable for work performed, sales
       made, etc., prior to the date of Closing. Examples of expense items are such things
       as rebates due customers, refunds due customers, customer deposits, purchases on
       account received, but not yet paid, etc. It is the intention of the Parties that the sale
       price of the Dealership[] shall be increased by all such items of income and
       decreased by all such items of expense. Accordingly, as soon as practical after
       Closing, Peterson Sullivan, LLP, Certified Public Accountants, Seattle,
       Washington, shall determine the necessary adjustments to the purchase price of the
       Dealership[] as a result of these items of income and expense. The amount so
       determined shall be paid by the Party owing a net positive amount to the other by
       bank wire transfer within five (5) days of the determination of the net amount due.

Clerk’s Papers (CP) at 115.

       Under the PSA, accounts receivable was defined as: “all amounts due the Dealership[] . . .

on account of services rendered, parts or accessories sold or delivered, used or new vehicles sold

or delivered, receivables due from the Franchisor, and all other accrued monetary claims or money

due the Dealership[] . . . as of the Closing Date with regard to the Business.” CP at 89.

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53640-4-II

         The closing memorandum and agreement contained a section entitled “Lawsuits” that listed

three pending lawsuits in which the Parrs were a party. The section concluded that the Parrs “agree

. . . to pursue each of these matters. . . . At the conclusion of each of these lawsuits the resulting

amounts receivable and amounts payable shall be subject to the post-closing provision below.” CP

at 82.

         In September 2015, the United States Environmental Protection Agency issued a notice of

violation to Volkswagen that alleged the company installed devices in certain cars to evade the

emission control system. The Parrs learned about the notice of violation when it first become

public, around September 18, 2015. However, the violation “was not an issue” when the parties

were negotiating the PSA. CP at 65. The sale of the dealership closed on December 10, 2015.

The purchase price did not change because of the violation.

         In April 2016, three Volkswagen dealerships filed a class action lawsuit on behalf of all

Volkswagen dealerships in the United States.1 In re Volkswagen “Clean Diesel” Mktg., Sales

Practices, & Prods. Liab. Litig., 229 F. Supp. 3d 1052, 1058 (N.D. Cal. 2017). The complaint

alleged that the dealerships lost significant value in the loss of goodwill and profits from the

unsellable cars as a result of emissions scandal. Am. Compl. at 1, In re Volkswagen “Clean

Diesel” Mktg., Sales Practices, & Prods. Liab. Litig., MDL No. 02672-CRB (JSC) (N.D. Cal.

Sept.           30,          2016)            (hereafter           Volkswagen             Litigation),

https://www.hbsslaw.com/sites/default/files/case-downloads/vw-

dealers/amendedandconsolidatedclassactioncomplaint-redacted-57f43b511c20b.pdf.                   The

1
 The Case was originally filed in the Northern District of Illinois then was transferred by the
United States Judicial Panel on Multidistrict Litigation to the United States District Court for the
Northern District of California.

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53640-4-II

complaint also alleged that Volkswagen had, independent from the emissions issues, engaged in

“illegal pricing and allocation schemes, and coercion to use Volkswagen Credit.” Am. Compl. at

1, Volkswagen Litig.

       In October 2016, the federal court granted preliminary approval of a settlement agreement

and approved notice to the proposed class.2 The settlement agreement defined the class as “all

authorized Volkswagen dealers in the United States who, on September 18, 2015, operated a

Volkswagen branded dealership pursuant to a valid Volkswagen Dealer Agreement.” In re

Volkswagen, 229 F. Supp. 3d at 1058. The settlement entitled each class member to payments

“intended as compensation to Dealer Settlement Class Members for alleged diminution in value

of the capital and goodwill in their franchises resulting from the TDI Matter and other alleged

action or inaction by Volkswagen to the extent such action or inaction is covered in the Released

Claims.” Final Settlement Agreement at 12-13, Volkswagen Litig. (N.D. Cal. Sept. 30, 2016),

https://www.hbsslaw.com/sites/default/files/case-downloads/vw-dealers/final-settlement-

agreement.pdf.

2
 The final settlement agreement was not approved until January 2016, but dealerships, including
Haselwood, could submit their claim prior to that time. In re Volkswagen “Clean Diesel” Mktg.,
Sales Practices, & Prod. Liab. Litig., 2016 WL 6091259 (N.D. Cal. Oct. 18, 2016).

                                               4
53640-4-II

       In exchange for receiving the funds, the settlement required class members to release any

claims related to the emissions scandal as well as claims related to illegal pricing and coercion. 3

The final settlement agreement discussed the claims and alleged damage resulting from the

emissions issue. It mentioned the claims not related to the emissions scandal once but did not

otherwise discuss them. Final Settlement Agreement at 20, Volkswagen Litig.

       Haselwood submitted the required forms to Volkswagen to claim the settlement amount.

Haselwood subsequently received a payment from the settlement. Other payments would be

forthcoming.

       In February 2017, the Parrs submitted forms to Volkswagen to claim the settlement

payments. Volkswagen denied the request for three reasons. First, the Parrs did not have the

authority to execute a release on behalf of the dealership that they no longer owned. Next,

“[b]ecause [Volkswagen] settled with and agreed to pay Volkswagen dealerships in operation as

of September 18, 2015, rather than the owners of Volkswagen dealerships in operation as of

September 18, 2015, you are not a class member and have no claims to any of the settlement funds

3
       (2) all claims related in any way to [Volkswagen Group of America, Inc.’s]
       previously announced goals or objectives for [United States] sales volume
       growth[,] . . . (3) all claims for monetary damages arising before the Effective Date
       of the Franchise Dealer Class Agreement that relate in any way to allocation
       complaints or irregularities[,] . . . (4) all claims for monetary damages arising before
       the Effective Date of the Franchise Dealer Class Agreement that relate in any way
       to the method upon which [Volkswagen Group of America, Inc.] measures the sales
       and service performance of its Volkswagen-branded franchise dealers or sets the
       sales and service objectives for its Volkswagen-branded franchise dealers[,] . . . and
       (5) all discrimination or coercion claims arising before the Effective Date of the
       Franchise Dealer Class Agreement related in any way to the sale, incentivization or
       use of [VCI Loan Services, LLC] wholesale and retail financing products
       (collectively, the "Released Claims").
CP at 203.

                                                  5
53640-4-II

owed to the authorized dealership.” CP at 515. Lastly, Volkswagen informed the Parrs that it

already “fulfilled its current obligations under the Agreement . . . because it has already made the

settlement payments due to the dealership entity, not the current or former owners of the

dealership.” CP at 515.

       Soon thereafter, the Parrs requested that Haselwood send them the settlement amount in

accordance with the PSA. Haselwood refused.

       In September, the Parrs filed a complaint, alleging that Haselwood breached the PSA by

refusing to allocate the Volkswagen settlement payments to the Parrs as required by section 10.2.7

of the PSA. The Parrs also requested a full accounting of any money received by Haselwood in

payment for the settlement, and any payment received as a result of the emission problems with

Volkswagen brand vehicles.

       Haselwood moved for summary judgment. In support of its motion, Haselwood submitted

an opinion by Drew Voth, a financial expert. Voth opined that generally accepted accounting

principles (GAAP) supported excluding the Volkswagen settlement payments in the post-closing

adjustments. According to Voth, the Volkswagen settlement payments were a type of contingent

income known under GAAP as a “gain contingency.” A gain contingency is “[a]n existing

condition, situation, or set of circumstances involving uncertainty as to possible gain to an entity

that will ultimately be resolved when one or more future events occur or fail to occur.” CP at 368.

       In support of the motion, Haselwood also submitted a copy of a valuation analysis of the

dealership from August to December 2015. The analysis concluded that the dealership’s goodwill

was “minimally impacted” by the emissions scandal between August and December 2015, the

closing period. CP at 251. Haselwood also submitted an industry publication analyzing auto

                                                 6
53640-4-II

dealership markets. It showed that, at the end of 2016, Volkswagen had a goodwill factor near the

bottom of its industry class.

       Haselwood also provided excerpts of Parr’s deposition. Parr admitted that he did not suffer

any damage from the emissions scandal, because when people purchased cars from the dealership

under his ownership, they did so without knowing that the cars contained devices that evaded the

emission control system.

       In opposition to the motion for summary judgment, the Parrs submitted a declaration by

Chris Russel, the managing partner of the Parrs’ accounting firm. Russel stated that “Peterson

Sullivan, LLP was never asked, nor did [it] ever undertake to determine which of the parties to this

lawsuit was entitled to any funds from Volkswagen or as a result of the class action lawsuit

involving the Volkswagen diesel emissions scandal.” CP at 452. The Parrs also included the

declaration of Michael Massey, an accountant. CP at 457. He agreed with Voth that “GAAP

requires that the [Volkswagen] Settlement Payment should not be recorded on the books of the

Company until December 19, 2016, when the dealership actually began receiving payments.” CP

at 457. However, 10.7.2 requires that items of income not yet received by the closing date be part

of the price adjustment. Therefore, he asserted that “[GAAP] only determines when the payment

is to be recorded on the books of the company. It is Section 10.7.2 of the PSA that determines

which of the parties is entitled to the money.” CP at 457-58.

       The court granted Haselwood’s motion for summary judgment and dismissed the claim. It

ordered that Haselwood, as the prevailing party, was entitled to reasonable attorneys’ fees and

costs. The Parrs appeal.

                                                 7
53640-4-II

                                           ANALYSIS

I.     BREACH OF CONTRACT

       The Parrs argue that there are genuine issues of material fact regarding whether Haselwood

breached the PSA. All of their arguments involve interpretation of the PSA. First, they contend

that the settlement proceeds are properly classified as income belonging to the Parrs under the

PSA. They also assert that because the original lawsuit brought claims related to conduct arising

prior to closing, the settlement proceeds constitute income under the PSA.4 Finally, the Parrs argue

that the conduct of the parties shows that they intended the settlement payments to be classified as

income. The Parrs also ask us to reverse the trial court’s award of attorney fees and costs. We

disagree with the Parrs and conclude that the settlement payments do not constitute income owed

to the Parrs under the PSA.

       We review a trial court’s decision to grant summary judgment de novo, performing the

same inquiry as the trial court. Lakey v. Puget Sound Energy, Inc., 176 Wash. 2d 909, 922, 296 P.3d
4
  The release agreement required class members to release any claims related to the emissions
scandal as well as claims related to illegal pricing and coercion. However, the Parrs’ arguments
before the court below did not mention the claims unrelated to the emissions issues. In the response
to Haselwood’s motion for summary judgment, the Parrs only mentioned the settlement amount
in relation to “defective emission devices on some of the vehicles the dealerships had purchased
as of September 18, 2015.” CP at 373. Additionally, at the hearing before the court on the
summary judgment motion, the Parrs did not mention the claims unrelated to the emissions
violation. The court stated that the purpose of the settlement was to compensate for the impact of
the emissions violations, including the decrease in good will of Volkswagen dealerships.
RAP 9.12 provides that “[o]n review of an order granting or denying a motion for summary
judgment the appellate court will consider only evidence and issues called to the attention of the
trial court.” It is for this reason that “[i]ssues and contentions neither raised by the parties nor
considered by the trial court when ruling on a motion for summary judgment may not be considered
for the first time on appeal.” Cano–Garcia v. King County, 168 Wash. App. 223, 248, 277 P.3d 34
(2012). We decline to consider the Parrs’ argument that the settlement proceeds constitute income
under the PSA because the original lawsuit brought claims related to conduct arising prior to
closing and unrelated to the emissions violation.

                                                 8
53640-4-II

860 (2013). Summary judgment is appropriate where there are “‘no genuine issues of material

fact and the moving party is entitled to judgment as a matter of law.’” Puget Sound Energy, Inc.,
176 Wash. 2d at 922 (quoting Qwest Corp. v. City of Bellevue, 161 Wash. 2d 353, 358, 166 P.3d 667

(2007)).

       The primary goal in interpreting a contract is to ascertain the intent of the parties, which

we determine by focusing on the objective manifestation of the parties in the written agreement

rather than the unexpressed subjective intent of either party. Hearst Commc'ns, Inc. v. Seattle

Times Co., 154 Wash. 2d 493, 503, 115 P.3d 262 (2005). Where the contract language is clear, the

intent is ascertained from the language of the contract as a question of law. In re Estates of Wahl,

99 Wash. 2d 828, 831, 664 P.2d 1250 (1983).

       Accordingly, “a court considers only what the parties wrote; giving words in a contract

their ordinary, usual, and popular meaning unless the agreement as a whole clearly demonstrates

a contrary intent.” 4105 1st Ave. S. Invs., LLC v. Green Depot WA Pac. Coast, LLC, 179 Wn.

App. 777, 784, 321 P.3d 254 (2014). Even without ambiguity, however, “extrinsic evidence is

admissible as to the entire circumstances under which the contract was made, as an aid in

ascertaining the parties’ intent.” Berg v. Hudesman, 115 Wash. 2d 657, 667, 801 P.2d 222 (1990).

       Although the Parrs state that there are genuine issues of material fact remaining, they argue

that the terms of the PSA dictate that the settlement payments are income. Interpretation of the

language of the contract is a question of law. Wahl, 99 Wash. 2d at 831. At issue is whether the

settlement payments from Volkswagen qualify as income under section 10.7.2 of the PSA.

       The PSA does not define income but instead gives examples: “contracts in transit, dealer

rebates, factory holdbacks, accounts receivable for work performed, sales made, etc., prior to the

                                                 9
53640-4-II

date of Closing.” CP at 115. The only conceivable categories the settlement could fall under are

accounts receivable or “etc.”

       The PSA defines accounts receivable as: “all amounts due the Dealership[] . . . on account

of services rendered, parts or accessories sold or delivered, used or new vehicles sold or delivered,

receivables due from the Franchisor, and all other accrued monetary claims or money due to the

Dealership[] . . . as of the Closing Date with regard to the Business.” CP at 89. The sale of the

dealership closed on December 10, 2015.

       In October 2016, the federal court granted preliminary approval of a settlement agreement

and approved notice to the proposed class. In re Volkswagen “Clean Diesel” Mktg., Sales

Practices, & Prod. Liab. Litig., 2016 WL 6091259 (N.D. Cal. Oct. 18, 2016). The federal court

approved the final settlement agreement in January 2017. In re Volkswagen, 229 F. Supp. 3d 1052.

Both of these events occurred after the sale of the dealership closed.

       Even if a settlement agreement could be considered income under the PSA, the

Volkswagen settlement does not because it does not fall within the definition of accounts

receivable. The payments did not and could not possibly have accrued or been due prior to the

closing date.5 Further, a settlement resulting from a then non-existent lawsuit is entirely unlike

the “work performed” or “sales made” that precede the word “etc.” which in any case is also

5
  The term “accrue” has different meanings. In a legal sense, for example, it means when a claim
begins for statute of limitations purposes. A cause of action accrues, generally speaking, when a
party has the right to apply to a court for relief. Malnar v. Carlson, 128 Wash. 2d 521, 529, 910 P.2d
455 (1996). According to Investopedia, in a financial sense, “[t]he term ‘accrue,’ when related to
finance, is synonymous with an ‘accrual’ under the accounting method outlined by Generally
Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS).
An accrual is an “accounting adjustment used to track and record revenues that have been earned
but not received, or expenses that have been incurred but not paid.” Something is “accrued”
financially        when         it       is        earned.              Accrue,     INVESTOPEDIA,
https://www.investopedia.com/terms/a/accrue.asp (last updated July 30, 2020).

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53640-4-II

cabined by “prior to the date of Closing.” CP at 115. Under the principle of ejusdem generis, a

general term used in conjunction with specific terms will be deemed to include only those things

that are in the same class or nature as the specific ones. Simpson Inv. Co. v. Dep't of Revenue, 141
Wash. 2d 139, 151, 3 P.3d 741 (2000) (discussing the maxim as a rule of statutory interpretation);

Kitsap County v. Allstate Ins. Co., 136 Wash. 2d 567, 590-91, 964 P.2d 1173 (1998) (discussing the

maxim as a principle of contract interpretation). Unlike the enumerated items of income identified

in section 10.7.2 or identified in the definition for accounts receivable, the Volkswagen settlement

proceeds were neither identifiable nor quantifiable on the date of closing.

        In the closing memorandum and agreement, the parties accounted for money payable to

the Parrs arising from lawsuits that were already pending at the time of closing. That section

provides that “[a]t the conclusion of each of [the three listed] lawsuits, the resulting amounts

receivable and amounts payable shall be subject to the post-closing provision.” CP at 82. The

parties demonstrate that they knew how to make provisions for proceeds from lawsuits. Had they

contemplated a settlement arising from an anticipated lawsuit, they would have included language

that provided for it, but they did not.

        The Parrs assert that the settlement payments meet the definition of accounts receivable

because the payments are receivables due from the Franchisor “‘as of September 18, 2015.’” Br.

of Appellant at 20 (quoting CP at 515). The payments were due on that date, according to Parr,

because the lawsuit defined the class as all authorized Volkswagen dealers who operated a

dealership on September 18, 2015, and Parr owned the dealership on that date.

        This argument fails for at least two reasons. First, the defined class does not change the

fact that the payments from the settlement agreement were not due to the dealership prior to

closing. The settlement occurred well after the closing date. Second, the final settlement

                                                11
53640-4-II

agreement makes clear that the payments were “intended as compensation for alleged diminution

in value of franchise dealers’ capital and goodwill.” Final Settlement Agreement at 4, Volkswagen

Litig. The alleged diminution in value did not occur on September 18, 2015 or even shortly

thereafter. Parr admitted that he did not suffer any injury because of the emissions scandal. The

valuation of the dealership shows that there was no harm done to the dealership between September

and December 2015. The Parrs were not the owners when Volkswagen dealerships felt the effects

of the violation. Therefore, the compensation for those effects cannot be “due” to the Parrs

regardless of the date in the class definition.

        Finally, the Parrs argue that the conduct of the parties, specifically the fact that after the

closing date the parties made adjustments to the purchase price under 10.7.2, shows that they

intended for the settlement to be classified as income under that provision and thus, a genuine issue

of material fact remains. However, because the language of the PSA is clear, we do not need to

consider the conduct of the parties to interpret it. Wahl, 99 Wash. 2d at 831.

        We conclude that the trial court did not err in granting summary judgment to Haselwood

because the Volkswagen settlement payments are not owed to the Parrs under the terms of the

PSA. Accordingly, the superior court’s grant of attorney fees and costs to Haselwood as the

prevailing party was also proper.6

6
  The PSA provides “[i]n any action brought to enforce any provision of this document, the
prevailing party shall be entitled to receive from the other party all reasonable costs and reasonable
attorneys’ fees incurred by the prevailing party.” CP at 121

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53640-4-II

II.    ACCOUNTING

       The Parrs assert that Haselwood refused to inform them of the exact amount of the

settlement funds Haselwood received; therefore, the Parrs are entitled to an accounting because

the exact amount of income properly allocated to the Parrs is complicated. We disagree.

       “‘[A] complaint for an accounting must show by specific averments that there is a fiduciary

relation existing between the parties, or that the account is so complicated that it cannot

conveniently be taken in an action at law. And it must allege that the plaintiff has demanded an

accounting from the defendant, and the latter's refusal to render it.’” Corbin v. Madison, 12 Wn.

App. 318, 327, 529 P.2d 1145 (1974) (internal quotation marks omitted) (quoting State v. Taylor,

58 Wash. 2d 252, 262, 362 P.2d 247 (1961)).

       Because the Parrs are not entitled to the settlement payments under the PSA, they have no

interest in the allegedly complicated account and are thus not entitled to an accounting of the

settlement funds.

       We affirm.

                                                            Melnick, J.

We concur:

       Worswick, P.J.

       Glasgow, J.

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