IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
CHICAGO TITLE INSURANCE COMPANY, of Washington, No. 84231-5-I
Plaintiff, DIVISION ONE
v. UNPUBLISHED OPINION
LEXMAR HOSPITALITY II, LLC,
Respondent,
CHE INVESTMENTS LLC,
Appellant.
CHUNG, J. — Che Investments seeks the return of its earnest money after
not completing the purchase of a hotel from Lexmar Hospitality. After a jury
verdict in Lexmar’s favor, Che appeals, arguing the trial court should have
determined as a matter of law that the parties did not have a valid purchase and
sale contract, but rather only an “agreement to agree.” Che also argues that if
there was a contract, it had a legal excuse not to complete the purchase because
Lexmar did not perform its duty to draft financing terms. We decline to engage in
post-trial review of the trial court’s denial of Che’s summary judgment motion, as
there were triable issues of fact. Because we determine that substantial evidence
supports the jury’s verdict awarding the earnest money to Lexmar, we affirm. No. 84231-5-I/2
FACTS
Che Investments LLC (Che), owned by Unshik James Che and MiRan
Che, successfully operated hotels in Alaska and Washington. Che 1 used “1031
exchanges,” named for a provision in the tax code, 26 U.S.C. § 1031, to defer
federal capital gains for like-kind transactions of investment property each time it
sold a property. In summer 2018, Che sought to purchase a hotel by
September 11, 2018, so it could preserve the tax benefit of a series of 1031
exchanges. Che would owe deferred taxes of close to a million dollars unless it
purchased a new property before the deadline.
To meet the deadline, seller financing would be essential because bank
financing would take too long to arrange. Che’s commercial real estate broker,
Steve Paek, found a hotel in Dupont, Washington, the Home2 Suites, that was
not on the market but whose owner, Lexmar Hospitality, was nevertheless willing
to sell and would provide seller financing.
On August 6, 2018, Che made an offer using a Commercial Brokers
Association (CBA) form purchase and sale agreement (PSA). Two days later, on
August 8, Lexmar counteroffered by making strikeouts and additions to the PSA.
Che initialed each change that same day.
The PSA included a CBA form financing addendum that explicitly stated it
was “part of the Purchase and Sale Agreement” and listed three options for
financing: New Financing, Assumption of Existing Financing, and Seller
1 We refer to James and MiRan Che by their first names and use Che to refer to their
LLC.
2 No. 84231-5-I/3
Financing. The parties checked the box for Seller Financing, and both initialed
the following modification:
a. Debt Instruments. If Seller is financing a portion of the purchase price, Buyer shall execute and submit to Closing Agent the loan agreement, promissory note, deed of trust, personal guaranty, and any other commercially reasonable documents required by Seller and Anchor Bank.
Under the Seller Financing subsection for “Payment Terms,” the box “other” was
selected, and the text “See line number 5 Additional Provisions and also attached
Addendum” was added.
In turn, Section 5, Additional Provisions, included pre-printed language
and handwritten additions to blank spaces specifying the following terms: an $8
million down payment against the hotel’s $32 million price, 24 months of interest-
only financing at a 5.5% variable rate based on the prime rate, a half-point fee for
loan origination, payment due dates, a 15-day default period, and the late
payment charge for any delinquent amount. These specific terms were initialed
and dated by both parties, and the entire financing addendum was signed on
each of its three pages by Che on August 6, 2018, and by Lexmar on August 8,
2018. 2
The PSA also contained a feasibility contingency. This contingency would
allow the buyer, Che, to walk away from the deal and receive a full refund of its
earnest money unless the buyer gave written notice within 10 days of mutual
2 Both parties signed an additional addendum on August 10, 2018, changing the escrow
company to Chicago Title and changing the due date for the first payment for the financing.
3 No. 84231-5-I/4
acceptance that it waived the contingency and also paid into escrow an
additional $1 million of nonrefundable earnest money. 3
The PSA specified September 7, 2018, to close. 4 It contained an
integration clause stating “[t]his Agreement and any addenda and exhibits thereto
state the entire understanding of Buyer and Seller regarding the sale of the
Property. There are no verbal or other written agreements which modify or affect
the Agreement.”
During the PSA’s 10-day feasibility period, the parties began exchanging
documents, and Che wired $1 million in earnest money to the parties’ escrow
company, Chicago Title. Nonetheless, James and MiRan emailed Paek on
August 19 that they had decided “not to pursue Home2 Suites.”
Che, however, continued discussing the purchase with Paek and Lexmar.
Che wanted to “make sure all the document[s] that [Lexmar] drafted or created or
generated is per PSA, what we agreed to”; James and MiRan were concerned
that there might be some variance “[b]ecause [Lexmar was] not using standard
forms.” Based on Che’s input, Paek wrote an “Addendum/Amendment to
Purchase and Sale Agreement” (August 20 Addendum).
The August 20 Addendum recites that it “is part of the Purchase and Sale
Agreement.” The first paragraph 5 states “1) Concerning Financing Terms,” and
3 Che initially offered $300,000 in earnest money. Lexmar’s counteroffer required $1
million in earnest money, and “an additional $1,000,000” of “nonrefundable” earnest money when waiving the feasibility contingency. Che accepted both changes when it signed the PSA on August 6. 4 The PSA stated, “The sale shall be closed on or before 9/7/2018. . . . Buyer and Seller
shall deposit with Closing Agent by 12:00 p.m. on the scheduled Closing date all instruments and monies required to complete the purchase in accordance with this Agreement.” 5 As the parties refer to the numbered items in the August 20 addendum as “paragraphs,”
we do the same.
4 No. 84231-5-I/5
subsequent paragraphs change the seller-financed interest rate from variable to
5.75% fixed, extend the term of seller financing from two years to 60 months,
state an amortization period of 30 years with no prepayment penalty, and offer an
additional year of seller financing at 6.5%. Paragraph 6 further addressed the
drafting of financing terms as follows:
6) Financing terms must be drafted as agreed as PSA [sic] and shall be reviewed by buyer. If financing terms are not as agreed in the contract, seller must revise the terms as agreed in the contract. If seller does not revised [sic] as agreed in PSA as buyer’s option, buyer can terminate the contract and the earnest money shall be returned back to buyer in full through escrow.
Paragraph 13 of the August 20 Addendum adds, “Feasibility contingency is
deemed satisfied and waived and buyer is moving toward closing.” Paragraph 14
of the Addendum stated that “Buyer shall put only an additional $250,000 into
escrow as part of the earnest money.” The Addendum ends by stating that “ALL
OTHER TERMS AND CONDITIONS of the [PSA] remain unchanged.” Both
parties signed the Addendum on August 20, 2018.
After the August 20 Addendum was signed, pursuant to its paragraph 6,
Lexmar drafted a financial term sheet summarizing the particulars of the PSA’s
seller financing. Paek sent this document to James and MiRan on August 22.
James testified that Lexmar’s financing term sheet “flustered” him because
“[t]here were bank’s loan assumption among other things that were never
mentioned with us.” Nevertheless, James marked up Lexmar’s term sheet, and
he released $250,000 more as additional earnest money into escrow per
paragraph 14 of the August 20 Addendum. In particular, James noted concerns
5 No. 84231-5-I/6
with the reference to a loan from Anchor Bank to Lexmar, as a critical aspect of
the deal for Che was seller financing solely by Lexmar.
Lexmar then prepared a revised financing term sheet. Paek emailed the
revised term sheet to James on August 27. Ninety minutes after receipt, James
emailed Paek, “This matter is handled [sic] over to attorney, Benjamin Lee. Any
future correspondence should be done through him.” Paek and Lee continued
corresponding about whether Che would request further changes to the financing
term sheet or request rescission. On August 31, Lexmar told Che it remained
“ready, willing, and able” to close, but by then Che had informed Lexmar it would
not go forward with the parties’ transaction. 6
Because the parties did not complete their transaction, Chicago Title
deposited $1 million in unrefunded escrow funds 7 with Pierce County Superior
Court and initiated the interpleader action below against Che and Lexmar in April
2019 to resolve their conflicting claims. The court then dismissed Chicago Title,
and Che moved for summary judgment to reclaim its earnest money. The court
denied that motion, and the case proceeded to a jury trial.
At trial, Che argued it was legally excused from any duty to close the
parties’ transaction under paragraph 6 of the August 20 Addendum and was
entitled to the return of its earnest money because no enforceable contract was
6 The parties do not dispute that as of August 31 Che informed Lexmar it would not close
on September 7. 7 Per paragraph 14 of the August 20 addendum and the PSA, the $250,000 in additional
earnest money that Che paid into escrow upon waiver of the feasibility contingency was nonrefundable.
6 No. 84231-5-I/7
ever formed. Lexmar argued that Che had no legal excuse not to complete the
purchase. The jury returned a general verdict in favor of Lexmar.
The court entered findings of fact and conclusions of law regarding fees
and costs, and it entered its judgment on the jury award to Lexmar totaling over
$1.5 million. Che filed a CR 59 motion for reconsideration or a new trial, which
the court denied. Che appeals.
ANALYSIS
Che assigns error to the trial court’s denial of its motion for summary
judgment and to the trial court’s entry of judgment on the jury verdict. Che also
challenges the award of attorney fees and costs. Both parties seek attorney fees
and costs on appeal.
A. Reviewability of trial court’s denial of motion for summary judgment
Che first claims the trial court erred by denying its motion for summary
judgment. Generally, a trial bars subsequent review of a denial of a summary
judgment motion because the trial resolves material issues of fact. Washburn v.
City of Federal Way, 178 Wn.2d 732, 745, 310 P.3d 1275 (2013) (citing Kaplan v.
Nw. Mut. Life Ins. Co., 115 Wn. App. 791, 65 P.3d 16 (2003)). Lexmar urges this
court to follow federal precedent and hold that “a denial of a summary judgment
motion after trial is never appealable,” citing Ortiz v. Jordan, 562 U.S. 180, 183-
84, 131 S. Ct. 884, 178 L. Ed. 2d 703 (2011). Even assuming that is a correct
interpretation of Ortiz, we decline this invitation, as the Washington Supreme
Court has made clear that a limited exception to the general rule of
nonreviewability exists where the denial of summary judgment turned solely on
7 No. 84231-5-I/8
an issue of substantive law rather than fact. Washburn, 178 Wn.2d at 745
(citing Univ. Vill. Ltd. Partners v. King County., 106 Wn. App. 321, 324, 23 P.3d
1090 (2001)). 8
We explained the reasoning for this general rule barring post-trial review
of denials of summary judgment in Johnson v. Rothstein, 52 Wn. App. 303, 759
P.2d 471 (1988). RAP 2.2 identifies which trial court decisions may be appealed
as a matter of right. We concluded that once a trial on the merits is held, neither
RAP 2.2(a)(1), allowing appeal from a final judgment, nor RAP 2.2(a)(3), allowing
an appeal from a decision determining the action, “permits review of a pretrial
order denying summary judgment when such denial is based on a trial court’s
determination of the presence of disputed, material facts.” Johnson, 52 Wn. App.
at 305. The reasons for such a rule are two-fold. First, the final judgment “can be
tested upon the record made at trial, not the record made at the time summary
judgment was denied.” Id. at 306 (quoting Evans v. Jensen, 103 Idaho 937, 655
P.2d 454, 459 (1982)). Second, the purpose of a summary judgment procedure
is to avoid a useless trial; once a trial on the merits has occurred, reviewing a
denial of a summary judgment motion “would do nothing to further this purpose.”
Id. at 307. Nor is there any “further relevance” to the summary judgment
procedure to determine the presence of material issues of fact. Id.
8 In Washburn, the court’s ruling on summary judgment was reviewable because it turned
solely on an issue of pure law, the existence of a duty—specifically, whether the defendant city’s police officers owed the plaintiffs’ deceased mother a duty of care when serving her antiharassment order on her partner. The trial court denied summary judgment based on its determination that the officers owed the decedent two duties: to serve her antiharassment order and to act reasonably when doing so. Id. at 752. Because these were questions of law, the Court reached the merits on review and affirmed. Id. at 762. Likewise, in University Village Ltd. Partners, the exception applied because “summary judgment was based on a legal conclusion”— the meaning of art. VII, § 1 of the Washington State Constitution. 106 Wn. App. at 324-25.
8 No. 84231-5-I/9
Here, in contrast to Washburn and University Village Ltd. Partners, the
denial of summary judgment did not turn on a pure issue of law. At summary
judgment, Che argued that the parties had no meeting of the minds on the PSA
because they never reached agreement on the material term of seller financing
either in the PSA or the August 20 Addendum. Specifically, Che focused on
paragraph 6 of the August 20 Addendum to the PSA, which stated that
“[f]inancing terms must be drafted as agreed as [sic] PSA and shall be reviewed
by buyer.” Che argued that Lexmar never drafted the key financing terms as
agreed in the PSA, and thus, paragraph 6 provided Che with a legal excuse:
“buyer can terminate the contract.”
“A valid contract requires the parties to objectively manifest their mutual
assent to all material terms of the agreement.” P.E. Sys., LLC v. CPI Corp., 176
Wn.2d 198, 209, 289 P.3d 638 (2012). “Normally, the existence of mutual assent
or a meeting of the minds is a question of fact” for the jury. Sea-Van Inv. Assocs.
v. Hamilton, 125 Wn.2d 120, 126, 881 P.2d 1035 (1994). Here, Che contends
that because paragraph 6 is unambiguous, and the interpretation of an
unambiguous contractual term is a matter of law, this court may review the denial
of its summary judgment motion. But the threshold question—whether there was
a meeting of the minds—is normally not a question of law. 9
9 See jury instruction no. 4 (“Che Investments has the burden of proving that it had a
legal excuse not to complete the purchase of the hotel from Lexmar Hospitality.”). By contrast, we may determine a contract’s proper interpretation as a matter of law if it does not turn on the credibility of or reasonable inferences drawn from extrinsic evidence. Kofmehl v. Baseline Lake, LLC, 177 Wn.2d 584, 594, 305 P.3d 230 (2013).
9 No. 84231-5-I/10
It is true that a question of fact may be determined as a matter of law if
reasonable minds could not differ. Keystone Land & Dev. Co. v. Xerox Corp., 152
Wn.2d 171, 178 n.10, 94 P.3d 945 (2004) (citations omitted). But such a
determination requires the court to review evidence, rather than determine a
“pure” issue of law. Here, because there was a disputed question of fact rather
than a pure question of law, the usual rule applies and post-trial review of the trial
court’s decision denying summary judgment is barred. See Johnson, 52 Wn.
App. at 305.
B. Denial of CR 59(a)(7) motion
In the alternative, Che argues the trial court erred in denying its CR
59(a)(7) motion because the verdict was “contrary to law.” 10 Che argues—as it
did in answering Chicago Title’s interpleader complaint, on summary judgment,
at trial, and in its CR 59 motion—that the PSA was an unenforceable agreement
to agree and Lexmar never drafted the material financing terms, the debt
instruments, for Che’s review.
CR 59(a), New Trial, Reconsideration, and Amendment of Judgments,
states:
On the motion of the party aggrieved, a verdict may be vacated and a new trial granted to all or any of the parties, and on all issues, or on some of the issues when such issues are clearly and fairly separable and distinct, or any other decision or order may be vacated and reconsideration granted. Such motion may be granted for any one of the following causes materially affecting the substantial rights of such parties:
10 Che’s briefing also assigns error to the court’s denying its motion for judgment as a
matter of law, even though it did not file any CR 50 motion. At oral argument, Che conceded this assignment of error was “wrong.” Regardless, “[a] directed verdict, judgment notwithstanding the verdict, or motion for new trial on sufficiency of the evidence each involve the same standard of review.” Lockwood v. AC & S, Inc., 44 Wn. App. 330, 353, 722 P.2d 826 (1986).
10 No. 84231-5-I/11
...
(7) That there is no evidence or reasonable inference from the evidence to justify the verdict or the decision, or that it is contrary to law.
We review a trial court’s decision on a motion under CR 59(a)(7) for abuse
of discretion. Kohfeld v. United Pac. Ins. Co., 85 Wn. App. 34, 40, 931 P.2d 911
(1997) (citing Detrick v. Garretson Packing Co., 73 Wn.2d 804, 812, 440 P.2d
834 (1968)). A trial court abuses its discretion when its decision is manifestly
unreasonable, or based on untenable grounds or reasons. Kohfeld, 85 Wn. App.
at 40. When an order granting or denying a new trial is “predicated upon rulings
as to the law . . . no element of discretion is involved.” Johnson v. Howard, 45
Wn.2d 433, 436, 275 P.2d 736 (1954).
The grant of a motion for a new trial is appropriate if, viewing the evidence
in the light most favorable to the nonmoving party, the court can say, as a matter
of law, that there is no substantial evidence or reasonable inferences to sustain
the verdict for the nonmoving party. Hizey v. Carpenter, 119 Wn.2d 251, 271-72,
830 P.2d 646 (1992). There must be “substantial evidence,” as distinguished
from a “mere scintilla” of evidence, to support the verdict—i.e., evidence of a
character “which would convince an unprejudiced, thinking mind of the truth of
the fact to which the evidence is directed.” Sommer v. Dep’t of Soc. & Health
Servs., 104 Wn. App. 160, 172, 15 P.3d 664 (2001) (citing Hojem v. Kelly, 93
Wn.2d 143, 145, 606 P.2d 275 (1980) (internal quotations omitted)).
In the present case, to prevail in the interpleader action below, Lexmar
had to establish that the parties formed an enforceable agreement and that it
11 No. 84231-5-I/12
performed its duty to draft financial terms in accordance with that agreement
such that Che did not have a legal excuse to terminate the transaction. 11 Thus, to
determine whether the trial court abused its discretion in denying Che’s CR 59
motion, we must determine whether, viewing the evidence in the light most
favorable to Lexmar as the nonmoving party, the record contains substantial
evidence to support the jury’s verdict awarding the interpleaded earnest money
to Lexmar.
1. Did the parties form an enforceable agreement?
The jury was instructed that forming a contract requires mutual assent and
consideration regarding the same essential terms. 12 Here, the record shows that
on August 6 Che offered to put $300,000 down on a purchase price of $32 million
for the Home2 Suites hotel. The purchase would close on September 7 once a
10-day feasibility condition was waived. Lexmar would provide seller financing,
for which Che would put $8 million down and make interest-only payments for 24
months at a 5.5% variable rate and also pay a half-point loan origination fee. 13
Che’s initial offer specified the use of standard form debt instruments, the
11 Jury instruction no. 4 states in its entirety:
Each party has the burden of proving that is entitled to the $1,000,000 of earnest money that Chicago Title deposited with the Court. Che Investments has the burden of proving that it had a legal excuse not to complete the purchase of the hotel from Lexmar Hospitality. Lexmar Hospitality has the burden of proving that Che Investments had no legal excuse not to complete the purchase of the hotel from Lexmar Hospitality. You should find in favor of the party that has met its burden of proof. 12 The parties do not dispute that this is a correct statement of the law. See, e.g., P.E.
Sys., 176 Wn.2d at 207. 13 The offer also included details about the timing of payments, duration of the financing,
the default period and interest rates during default, and prepayment. Altogether the form offer contained 23 pages with 28 main clauses and 6 addenda covering financing, utilities, affiliated businesses, agents, continuing operations, staff, training, payroll, commission, franchisor approval, mechanical equipment, and a legal description of the property.
12 No. 84231-5-I/13
Commercial Brokers Association’s (CBA) forms, to document Lexmar’s seller
financing. In the event of buyer’s default without legal excuse, the form PSA
provided that the seller could keep the earnest money as liquidated damages,
sue for actual damages, sue for specific performance, or pursue any other rights
or remedies.
The evidence at trial further showed that on August 8, Lexmar made a
counteroffer. It did not change the hotel’s price, the date of closing, or the 10-day
contingency period, but it did increase the down payment to $1 million and
require an additional $1 million of nonrefundable earnest money to waive the
contingency. Further, the counteroffer added conditions to, and changed the
documentation of, the seller financing it would provide. 14 The counteroffer
specified that the prime rate was currently 4.5%, that the loan was subject to a
“comfort letter” from the hotel’s franchisor, 15 and that Lexmar would have access
to Che’s records to ensure Che promptly cured any problems with the franchisor.
For the financing, Lexmar’s counteroffer specified the use of non-CBA debt
instruments including a loan agreement, promissory note, deed of trust, personal
guaranty, and “any other commercially reasonable documents required.” At trial,
both Che and Lexmar testified that because Lexmar would be financing the
purchase, they both read this clause to mean that Lexmar would draft the loan
documents for Che’s review.
14 Lexmar’s counteroffer proposed 26 changes to Che’s offer. 15 Lexmar’s real estate attorney, Sandip Soli, testified that a “comfort letter” is a letter
from the hotel franchise—here, Hilton—that is very typical in hotel transactions and provides the lender the right to cure defaults by the operator so it can continue to operate as that brand.
13 No. 84231-5-I/14
Che initialed each change the day the counteroffer was made, August 8.
Thus, the record contains substantial evidence showing Che made an offer that
Lexmar countered, and Che accepted, evidenced by their both having signed the
PSA obligating Che to pay $32 million for the Home2 Suites hotel with seller
financing provided by Lexmar.
James told Paek on August 19 that Che had decided “not to pursue
Home2 Suites.”16 However, the parties do not dispute that on August 20, the
same day the 10-day contingency period was to expire, they signed an
addendum to their PSA. This August 20 Addendum recites that it “is part of the
Purchase and Sale Agreement.” Its first paragraph changes the seller-financed
interest rate from 5.5% variable to 5.75% fixed, extends the term of seller
financing from 24 to 60 months, states an amortization period of 30 years with no
prepayment penalty, and offers an additional year of seller financing at 6.5%.
Significantly, given the expiration of the contingency period that same day, it
states the “[f]easibility contingency is deemed satisfied and waived and buyer is
moving toward closing.” The very next sentence states, “Buyer shall put only an
additional $250,000 into escrow as part of the earnest money.” The Addendum
ends by stating that “ALL OTHER TERMS AND CONDITIONS of the [PSA]
remain unchanged.” Thus, the record contains substantial evidence showing the
16 If this were the end of the matter, the PSA unambiguously would have allowed Che to
reclaim its $1 million down payment under clause 2 as it had not waived the feasibility contingency or paid into escrow the nonrefundable additional amount required for waiver under clause 5 (which was $1 million prior to the August 20 Addendum).
14 No. 84231-5-I/15
parties modified the original PSA they had entered into on August 8. 17 Che
waived the PSA’s feasibility contingency before it expired in exchange for
improved seller financing terms from Lexmar.
Che argues that Lexmar never drafted the material seller financing terms,
i.e., the debt instruments, for its review, so the PSA was an unenforceable
agreement to agree. An agreement to agree, which is “an agreement to do
something which requires a further meeting of the minds of the parties and
without which [the agreement] would not be complete,” is unenforceable.
Keystone, 152 Wn.2d at 175-76.
In Keystone, the buyer claimed an exchange of letters between its broker
and the seller’s broker created an enforceable contract to negotiate and prepare
a purchase and sale agreement because “all the key terms of the substantive
agreement were settled.” Id. at 174-75. The Court reasoned that the buyer had
not identified “an offer and acceptance to be bound to specific standards of
negotiating conduct for the formation of a separate substantive contract” where
the seller’s letter stated it was “prepared to negotiate a Purchase and Sale
Agreement.” Id. at 178-79. There was no objective manifestation by the seller of
an intent to be bound if the buyer accepted the modifications proposed by the
seller. Id. at 179. Thus, the Court reasoned, “[i]n the absence of objective
manifestations of mutual assent to definite terms supported by consideration, no
17 The parties also signed an addendum to the PSA on August 10, but these provisions
are not material to the dispute. Therefore, we refer to August 8 as the date the parties signed the original PSA.
15 No. 84231-5-I/16
contract was formed.” Id. The Court held the letter presented “[a]t best . . . an
implied agreement to agree.” Id. at 180.
Similarly, Hubbell v. Ward, 40 Wn.2d 779, 246 P.2d 468 (1952), involved
an agreement to sign a future contract rather than an enforceable agreement. A
purchaser agreed to pay $9,000 down “and sign a contract for the balance,
payable at $200.00 or more per month, including interest at the rate of 5%” for a
$29,000 apartment building. Id. at 780. The seller refused to close, and the
purchaser sued for specific performance, which the trial court granted. Id. at 780-
81. The Court held this was error because there was “no understanding between
the parties as to what the[ ] additional terms should be” in their future contract. Id.
at 782.
Courts have also held that parties did not enter into an enforceable
agreement when the parties have not agreed on the material terms. For example,
in Sea-Van, a buyer and two sellers exchanged correspondence concerning the
sale of two adjoining parcels of real property. 125 Wn.2d at 123. The buyer
offered two different purchase options, one of which was for $3,000 per acre,
20% down, with the balance on an interest-only two-year note at 10% per year,
subject to the two parcels closing together and proof of clear title. Id. The sellers
purported to accept the option of $3,000 per acre, but added the conditions that
payment on the note be made quarterly and that the two parcels close
separately. Id. at 123, 127. When the buyer inquired about closing, the sellers
refused to sell, and the buyer sued for specific performance. Id. at 124-25. The
trial court determined no contract was formed because the buyer’s and sellers’
16 No. 84231-5-I/17
minds did not meet on the terms of the promissory note, the terms of a deed of
trust, the type of deed, the time of closing, or the payment of taxes. Id. The
Supreme Court agreed with the trial court because “[t]here was no meeting of the
minds here as to any of the material terms of the contract except for the price.”
Id. at 129.
In the present case, unlike the letters in Keystone that were insufficient to
establish agreed terms, the parties here used a commercial brokers’ association
form purchase and sale agreement with blanks for material terms. The parties
filled in the blanks and interlineated the comprehensive form contract with
additional details in both the offer and counteroffer, and both parties accepted the
written terms by initialing each change and signing and dating each page. The
signed PSA and August 20 Addendum evidence an objective manifestation of
definite terms supported by consideration.
Moreover, unlike in Sea-Van and Hubbell, here, the parties’ PSA and the
August 20 Addendum contained all the material terms essential to the sale of the
Home2 Suites hotel. The parties’ PSA, based on a CBA form and further
customized by the parties, spans 23 pages that contain 28 main clauses. The
financing addendum to the original PSA includes details about the timing of
payments, duration of the financing, the default period and interest rates during
default, and prepayment. There are six additional addenda to the original PSA
covering financing, utilities, affiliated businesses, agents, continuing operations,
staff, training, payroll, commission, franchisor approval, mechanical equipment,
and a legal description of the property. And as evidenced by the August 20
17 No. 84231-5-I/18
Addendum, Che negotiated better terms and modified the original PSA on the
critical issue of seller financing, including the interest rate (5.75% fixed), term (60
months), amortization period, and adding the option of an additional year of seller
financing at 6.5% interest.
In support of its position that the parties did not agree on all material
terms, Che points out that the “actual form and content of the Loan Documents
referenced in Section 3(a),” the debt instruments comprising “the loan
agreement, promissory note, deed of trust, personal guaranty, and any other
commercially reasonable documents required by Seller” to close, “were never
presented to Che prior to the parties’ countersigning the August 8, 2018 PSA.”
Even Lexmar’s revised term sheet, Che argues, referred to debt instruments not
mentioned in the PSA, such as an assignment of rents, a security agreement,
personal guarantees, an environmental indemnity, and a management
agreement.
But at trial, Lexmar’s expert, Christopher Brain, testified that it is industry
practice and commercially reasonable to draft instruments such as the deed of
trust, promissory note, and security documents after the purchase and sale
agreement: “In other words, you have a binding purchase and sale agreement,
and then the documents, the implementing documents . . . are drafted after that.
And generally, they only have to be done by closing, which is the date you
actually close the transaction.”18 Che did not counter this evidence at trial with
18 Asked about whether Anchor Bank’s loan documents were disclosed in the PSA,
Lexmar’s transaction attorney Solip testified that “in [his] experience, we wouldn’t have done that,” and he has “never in 20 years, ever seen that disclosed in the PSA.” He also stated that the deed of trust “would have been disclosed in the title report,” which was “usually a separate
18 No. 84231-5-I/19
expert testimony. In the present case, there is substantial evidence of offer and
acceptance as to material terms. See Keystone Land & Dev. Co., 152 Wn.2d at
178 (“Generally, manifestations of mutual assent will be expressed by an offer
and acceptance.”).
When documents containing material terms are referenced but not
included or attached to the contract, courts have denied specific performance on
the contract. For example, in Kruse v. Hemp, 121 Wn.2d 715, 853 P.2d 1373
(1993), a lessee sued for specific performance to enforce a lease provision giving
him an option to buy. Id. at 718. However, the lease did not have any attached
real estate purchase and sale agreement to which the parties had agreed. Id. at
723. The Court reversed specific performance granted to the lessee after it
concluded no meeting of the minds occurred as to material and essential terms
because the parties did not refer to or attach an agreed-upon real estate contract
form, as is standard practice in Washington. Id.
Similarly, in Setterlund v. Firestone, 104 Wn.2d 24, 700 P.2d 745 (1985),
a buyer sought specific performance of an earnest money agreement that
required the attachment of the parties’ promissory note and deed of trust, but
neither was attached. Id. The Court affirmed dismissal by the trial court because
the buyer “never even offered or introduced those two documents which would
cast into legal formality the terms and conditions upon which the seller’s security
depended.” Id. at 26.
document” in the control of the title company, and the title report did not exist when the PSA was signed, because “usually the title report gets issued after the folks sign the PSA.”
19 No. 84231-5-I/20
By contrast, in the present case, while the PSA and the August 20
Addendum refer to other documents necessary to close, such as the promissory
note, debt instruments, and financing term sheets, they do not require them to be
attached or refer to them as attached. Moreover, the PSA and August 20
Addendum already contain all the material terms. As analyzed above, trial
testimony established that it is customary for the parties to complex transactions
to agree to term sheets summarizing financial details from which the debt
instruments required to close a transaction are prepared immediately prior to
closing. The plain language of paragraph 6 requires Lexmar to draft “[f]inancing
terms” for Che to review, not the debt instruments themselves. Paragraph 6 does
not introduce new financing terms to the parties’ agreements. Rather, it states
three times that Lexmar must draft terms that conform to what the parties already
agreed to: “Financing terms must be drafted as agreed as [sic] PSA,” “seller must
revise the terms as agreed in the contract,” and “[i]f seller does not revise[] as
agreed in PSA . . . buyer can terminate the contract . . . .” The PSA or any of the
multiple addenda, including the August 20 Addendum, could have required
Lexmar to draft the actual debt instruments required to close the transaction for
Che’s review, but they did not do so.
2. Did Lexmar perform its duty to draft financing terms in accordance with the August 20 Addendum?
Because the parties entered into an enforceable agreement, the next
issue is whether Che had a legal excuse not to close on the hotel purchase. 19
19 Che’s waiver of the PSA’s feasibility contingency relinquished its right not to close the
transaction, as set out in the PSA, paragraph 5. But it could still have a legal excuse not to close pursuant to the August 20 Addendum. Accordingly, as noted previously, the jury received this
20 No. 84231-5-I/21
Paragraph 6 of the August 20 addendum gave Lexmar the duty to prepare
financing terms as agreed to in the original PSA:
6) Financing terms must be drafted as agreed as [sic] PSA and shall be reviewed by buyer. If financing terms are not as agreed in the contract, seller must revise the terms as agreed in the contract. If seller does not revised [sic] as agreed in PSA as buyer’s option, buyer can terminate the contract and the earnest money shall be returned back to buyer in full through escrow.
Every contract involves an implied duty of good faith and fair dealing. Badgett v.
Sec. State Bank, 116 Wn.2d 563, 569, 807 P.2d 356 (1991). This duty requires
that the parties perform the terms of the agreement in good faith. Id. However,
the implied duty does not permit the parties to add or contradict the terms of the
agreement. Id. at 572; Goodyear Tire & Rubber Co. v. Whiteman Tire, Inc., 86
Wn. App. 732, 738, 935 P.2d 628 (1997). 20
The August 20 Addendum placed on Lexmar a duty to draft the financing
terms as previously agreed in the PSA, as well as the implied duty to act in good
faith in drafting the term sheet. Paragraph 6’s plain language would allow Che to
terminate only if Lexmar did not draft or, after Che’s review, did not revise the
financing terms “as agreed” to in the parties’ PSA, as modified by their August 20
Addendum.
After the August 20 Addendum was signed, on August 22, Paek emailed
Lexmar’s initial seller financing term sheet to James and MiRan. The record
shows James made extensive alterations to it. In particular, Che objected to the
instruction: “Che Investments has the burden of proving that it had a legal excuse not to complete the purchase of the hotel from Lexmar Hospitality. Lexmar Hospitality has the burden of proving that Che Investments had no legal excuse not to complete the purchase of the hotel from Lexmar Hospitality.” 20 The jury also received instructions on the implied duty of good faith and fair dealing.
21 No. 84231-5-I/22
references to Anchor Bank in the term sheet. Paek then worked with Lexmar’s
transactional attorney to prepare a revised term sheet, which Paek sent to James
on August 27. In response to Che’s objections, Lexmar arranged for its loan from
Anchor Bank to be fully paid off at closing, thus removing Anchor Bank from any
involvement with the seller financing of Che’s purchase, as reflected in the
revised version of the financing term sheet. Paek advised James and MiRan that
“this financing term sheet is what was agreed by buyer and seller per contract,”
and that Lexmar had “followed through on [its] end with the agreement.”
At trial, Lexmar’s commercial real estate expert, Christopher Brain
linked every item on Lexmar’s revised term sheet to the parties’ PSA or
the August 20 Addendum. Thus, there was substantial evidence that
Lexmar performed its duty under paragraph 6 to draft financing terms as
agreed to in the parties’ PSA. 21
Substantial evidence supports the jury’s verdict awarding the
interpleaded funds to Lexmar because the record shows the parties
formed an enforceable agreement with the PSA and the initial addenda,
and then modified that agreement with the August 20 Addendum, which
was also enforceable. Substantial evidence also establishes that Lexmar
drafted a revised seller financing term sheet based on the parties’
agreement, thus performing its duty as set out in paragraph 6 of the
August 20 Addendum. Accordingly, Che did not have a valid excuse for
21 To the extent Che argues that Lexmar never drafted the debt instruments required to
close their transaction on September 7, the law did not require Lexmar to tender a useless performance after Che gave notice on August 31 that it would not close. See Puget Sound Serv. Corp. v. Bush, 45 Wn. App. 312, 318, 724 P.2d 1127 (1986).
22 No. 84231-5-I/23
failing to complete the transaction, and the trial court did not abuse its
discretion by denying Che’s motion for reconsideration or a new trial under
CR 59(a)(7).
C. Attorney Fees and Costs
Che also assigns error to the court’s award of fees and costs to Lexmar.
Under RCW 4.84.330, a prevailing party in any action to enforce a contract or
lease that provides for attorney fees and costs is entitled to reasonable fees and
costs. Clause 21 of the parties’ PSA states, “[I]f Buyer or Seller institutes suit
against the other concerning this Agreement, the prevailing party is entitled to
reasonable attorneys’ fees and expenses. In the event of trial, the amount of the
attorney’s fee shall be fixed by the court.” Because Lexmar is the prevailing
party, the trial court properly awarded it fees and costs per the parties’ PSA. 22
Lexmar also requests fees on appeal under RAP 18.1(b), citing to the
parties’ prevailing party clause in the PSA. A contract that provides for attorney
fees at trial also supports such an award on appeal. Atlas Supply, Inc. v. Realm,
Inc., 170 Wn. App. 234, 241, 287 P.3d 606 (2012). Therefore, as Lexmar is the
prevailing party on appeal, we award it fees and costs on appeal, conditioned on
its compliance with RAP 18.1.
Affirmed.
22 The court used the lodestar method to calculate the award, and Che did not oppose
the amounts Lexmar claimed in its motion for fees and costs.
23 No. 84231-5-I/24
WE CONCUR: