FILED
APRIL 21, 2015
In the Office of the Clerk of Court
WA State Court of Appeals, Division III
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON DNISION THREE
GRANT COUNTY PORT DISTRICT ) No. 3l673-4-III NO.9, PORT OF EPHRATA, ) ) Respondent, ) ) v. ) ) WASHINGTON TIRE CORPORATION, ) OPINION PUBLISHED a Washington Corporation, ) IN PART ) Appellant, ) ) CHICAGO TITLE COMPANY OF ) OREGON, an Oregon corporation, ) ) Defendant. )
LAWRENCE-BERREY, J. - Grant County Port District No.9 (the Port) and
Washington Tire Corporation (WTC) entered into an earnest money agreement (EMA).
Under this agreement, WTC agreed to purchase real property from the Port. Shortly
before closing, the Port commissioners voted to terminate the agreement. The trial court
granted summary judgment in favor of the Port, concluding that the Port was entitled to
repudiate the agreement. The trial court also held that WTC's exclusive remedy under the No. 31673-4-III Grant County Port. Dist. v. Wash. Tire Corp.
EMA for the Port's breach was rescission and return of its $40,000 earnest money. We
hold that the Port was not entitled to repudiate the agreement and that the EMA does not
provide the exclusive remedy for the Port's breach. We therefore reverse the trial court
and remand for further proceedings.
FACTS
As this is an appeal from summary judgment orders favoring the Port, we set forth
the facts in the light most favorable to WTC, the nonmoving party.
WTC's principal, Abraham Hengyucius (Abraham), was born in China and earned
a PhD from Nanjing University in China. In about 2005, Abraham formed American Tire
Corp., a New Jersey corporation to develop and deliver giant off-the-road (OTR) tires.
OTR tires are expensive, industrial-sized tires used on large vehicles, primarily in the
mining industry.
In about November 2007, the Seattle Office of the Washington State Department
of Community Trade and Economic Development wrote to Abraham to discuss a
potential facility in Washington. In 2007 and 2008, Abraham visited Washington to view
potential sites for a manufacturing facility, including a site off of Interstate 90 in Grant
County.
No. 31673-4-III Grant County Port. Dist. v. Wash. Tire Corp.
In July 2008, Abraham fonned WTC as the entity responsible for developing the
new OTR tire plant in Washington. In 2009, Abraham fonned Washington Investment &
Development, LLC (WID), which started working to identifY and obtain commitments
from investors wishing to obtain an EB-5 visa. 'Such a visa allows foreign nationals who
invest significant sums in the United States to obtain a green card. WID procured several
investors to invest in a proposed tire facility in Washington. WTC also engaged Scott
Fraser of GVA Kidder Mathews to act as a buyer's broker on its behalf. Mr. Fraser
assisted in detennining WTC's operational needs, and traveled with Abraham toward
locating an appropriate manufacturing site in Washington.
In August 2008, Mr. Fraser and Abraham visited a 96-acre site located in Ephrata,
which was owned by the Port. WTC concluded that this location was a good fit for its
planned tire manufacturing facility. Mr. Fraser submitted an offer to purchase the
property on WTC's behalf, including a proposed purchase and sale agreement. The Port
proposed its own contract and, on October 1, 2008, Abraham executed the EMA. The
EMA contemplated a number of conditions which were required to be met prior to
closing. WTC deposited $40,000 into escrow.
In furtherance of satisfYing these conditions, Abraham, on behalf of WTC, met
with various government agencies, including the Governor's Office of Regulatory
Assistance, Grant County public utility district, Grant County economic development
council (EDC), city of Ephrata officers, and several Port officers. WTC retained
Columbia Northwest Engineering and environmental professionals to finalize off-site
infrastructure, water, sewer, and air studies. WTC worked with the Department of
Ecology in Spokane to discuss environmental, waste water, and air permit issues, and the
Port required that WTC process all studies necessary to obtain Federal Aviation
Administration (FAA) approval of the land transaction. In July 2009, WTC completed
and submitted a 30-year traffic study. In December 2009, WTC provided the Port with a
2S4-page report relating to environmental issues.
In January 2010, WTC arranged for its investors to visit Port officials and the
surrounding area. In March 2010, the Port's manager, Michael Wren, visited China to
meet with WTC's investors. This meeting was arranged at WTC's cost and expense.
During the meeting, Mr. Wren was introduced to a number of Chinese people and was
made aware of the Chinese custom of Chinese people using Americanized names when
working with people in the West. In May 2010, WTC similarly arranged for Washington
state senators to visit China in support ofWTC's investment in Washington.
On July 20,2010, Mr. Wren notified WTC that the Port had received the Land
Release Notification from the FAA. WTC responded by accepting the conditions of the
land sale transaction. By doing so, WTC satisfied all of its conditions under the EMA.
The Port was responsible for completing the two tasks remaining before the sale could
close: (I) clear title relating to easements, and (2) obtain a single tax identification
number for the parceL
In late July 20 I 0, WTC arranged another meeting and presentation for investors to
visit the property. The program included a slot for Abraham to speak. On August 2,
2010, Abraham provided Grant County EDC with the visitors' legal names, including his
own Chinese name. In the e-mail, Abraham requested that'" Regarding the agenda,
please kindly change my name to Jacqueline Zhn=ang (sic) for the presentation.'"
Clerk's Papers (CP) at 319. The Port apparently concluded that Abraham intended to
make the presentation under a different name (Jacqueline Zhang). Abraham subsequently
clarified to Terry Brewer and the Port that '" [Ms.] Zhang is a lady responsible for EB-5
marketing'" and that '" Hengyu Zhang is my Chinese name'" and '" Abraham is my
American name.'" CP at 319. The Port immediately requested that the FAA delay the
land transfer documentation being prepared for the impending closing.
On August 4, 2010, Mr. Wren wrote to Abraham stating that he did not want the
name issue '''to get blown out of proportion'" but that he was "'tasked by [the Port's]
commissioners to get some clarification so that we can continue to support [WTC].'"
No. 31673-4-111 Grant County Port. Dist. v. Wash. Tire Corp.
CP at 319 (alterations in original). In the e-mail.Mr. Wren noted the common cultural
practice of using a western name: '" After being in China myself, I understand how
common the use of American names is, however, can you please show me something
(fax) that shows your legal name to include Abraham, since that is what you've signed all
of the documents by?'" CP at 319. Mr. Wren indicated that the Port would not move
forward without this infonnation.
On August 6, 2010, WTC provided copies of Abraham's identification showing
his Chinese name and made clear that Abraham Hengyucius is his American name. On
August l3, 2010, Mr. Wren sent Abraham a letter from the Port's legal counsel, Kathryn
Kennison. In the letter, Ms. Kennison acknowledged the nearly two years of progress on
the project that WTC had perfonned to satisfy the conditions prior to closing, resulting in
the Port finally obtaining FAA approval to close. Ms. Kennison wrote, '" Before
proceeding any further with closing this transaction, the Port will require certification
from a Washington attorney known to myself who deals extensively in commercial
transactions which established the legitimate incorporation of Washington Tire
Corporation, and the legal authority of "Abraham Hengyucious" [sic] to bind Washington
Tire Corporation as its President.'" CP at 320 (alterations in original).
No. 31673-4-III
Grant County Port. Dist. v. Wash. Tire Corp.
WTC provided the Port with its articles of incorporation and certificate of
incorporation. Abraham also offered to execute any and all documents the Port might
require to resolve the Port's concerns. Abraham used his American name on the articles
of incorporation in which he signed as "Incorporator," and he also was identified on the
Secretary of State's website as the chairman ofWTC. CP at 337.
On August 27,2010, Abraham legally changed his name from Hengyu Zhang to
Abraham Hengyucius. Abraham provided the Port with a copy of the Pierce County
District Court's Order Changing Name, filed on August 27, 2010. In addition, WTC had
its broker-Mr. Fraser-go to Ephrata to meet with the Port, and he offered to have WTC
execute whatever replacement documents may be required to further clarify Abraham's
authority to execute documents as Abraham Hengyucius on behalf of WTC.
Although the Port received documentation and assurances from WTC on the issues
it deemed important, it did not timely receive the "certification from a Washington
attorney known to [the Port's attorney] who deals extensively in commercial transactions"
verifying Abraham's authority. CP at 253. On September 20, the Port commissioners
voted to terminate the EMA based on "unresolved issues regarding WTC['s] corporate
status and Mr. Hengyucius' [Zhang] authority to sign on behalf ofWTC." CP at 140.
The Port soon after brought this declaratory action, seeking to have the court declare that
WTC breached the EMA by failing to give adequate assurances, or, alternatively, that
WTC's exclusive remedy for the Port's breach was return of its $40,000 earnest money
deposit. WTC counterclaimed for specific performance or, alternatively, damages under
theories of restitution and promissory estoppel. WTC also counterclaimed for rescission
and return of its earnest money, but later chose not to pursue this relief.
In the first summary judgment proceeding, the trial court held as a matter of law
that WTC anticipatorily breached the EMA by failing to give adequate assurances, and
this failure allowed the Port to repudiate the EMA. The trial court dismissed all of
WTC's counterclaims except promissory estoppel. In the second summary judgment
proceeding, the trial court held as a matter of law that WTC was not entitled to damages
under promissory estoppel; but, rather, its exclusive remedy under the EMA was a refund
of its $40,000 earnest money deposit. The trial court ordered the return ofWTC's earnest
money, less the Port's reasonable attorney fees, costs, and expenses as provided under the
EMA. WTC appealed the trial court's summary judgment orders.
ANALYSIS
This court reviews summary judgment orders de novo. Lunsford v. Saberhagen
Holdings, Inc., 166 Wn.2d 264, 270, 208 P.3d 1092 (2009). When reviewing summary
judgment orders, the appellate court engages in the same inquiry as the trial court,
viewing the facts and all reasonable inferences in the light most favorable to the
nonmoving party. Riojas v. Grant County Pub. Util. Dist., 117 Wn. App. 694, 697, 72
P.3d 1093 (2003). Summary judgment is appropriate only if the moving party can show
that "there is no genuine issue as to any material fact and that the moving party is entitled
to a judgment as a matter of law." CR 56(c). "A material fact is one upon which the
outcome of the litigation depends in whole or in part." Atherton Condo. Apartment-
Owners Ass'n v. Blume Dev. Co., 115 Wn.2d 506,516,799 P.2d 250 (1990).
The burden is on the moving party to show an absence of an issue of material fact.
Youngv. Key Pharm.} Inc., 112 Wn.2d 216, 225,770 P.2d 182 (1989). If the moving
party submits adequate affidavits to meet its burden, the burden shifts to the nonmoving
party to set forth specific facts to rebut the moving party's contentions and show that a
genuine issue of material fact exists. Seven Gables Corp. v. MGMlUA Entm 't Co., 106
Wn.2d 1, 13,721 P.2d 1 (1986). The nonmoving party may not rely on speculation or
argumentative assertions to defeat summary judgment. Id.
Summary judgment on the interpretation of a contract is "proper where 'the
parties' written contract, viewed in the light of the parties' other outward objective
manifestations, has only one reasonable meaning.'" Spradlin Rock Prods.} Inc. v. Pub.
Util. Dist. No.1 o/Grays Harbor County, 164 Wn. App. 641, 655, 226 P.3d 229 (2011)
No. 3 I 673-4-III Grant County Port. Dist. v. Wash. Tire Corp.
(quoting Hall v. Custom Craft Fixtures, Inc., 87 Wn. App. 1,9,937 P.2d 1143 (1997)).
The interpretation of an unambiguous contract is a question of law that we review de
novo. Stranberg v. Lasz, 115 Wn. App. 396, 402, 63 P.3d 809 (2003).
Paragraph 9 of the EMA provides:
ENFORCEMENT: If title is insurable and all other terms of the Agreement are satisfied, and Purchaser refuses to complete purchase, then the earnest money shall be forfeited to Seller as liquidated damages. If Seller refuses to complete the sale then Purchaser shall be entitled to rescission of this Agreement and return of its earnest money.
CP at 26 (bold in original) (emphasis added).
The Port has two alternative arguments. The first argument is that WTC
repudiated the purchase and sale agreement by failing to give adequate assurances that it
would perform. Under this theory, WTC is in breach, and the remedy provision
applicable to purchaser's breach needs to be reviewed. The second argument is that it,
the Port, breached the purchase and sale agreement when it refused to proceed with the
closing. Under this theory, the Port is in breach, and the remedy provision applicable to
seller's breach needs to be reviewed. We begin by determining whether the evidence,
taken in the light most favorable to WTC, supports the Port's repUdiation argument; and,
if so, whether the doctrine of anticipatory repudiation applies in the context of a purchase
and sale of real property.
No. 3 I 673-4-II1 Grant County Port. Dist. v. Wash. Tire Corp.
A. Whether WTC repudiated the EMA
WTC challenges the trial court's finding that it repudiated the EMA as a matter of
law. A party's anticipatory repudiation of a contract excuses the other party's
performance. CKP, Inc. v. GRSConstr. Co., 63 Wn. App. 601, 620,821 P.2d63 (1991).
Such repudiation must occur before the other party's performance is due. Wallace v.
Kuehner, III Wn. App. 809, 816,46 P.3d 823 (2002). "An intent to repudiate may be
expressly asserted or circumstantially manifested by conduct." CKP, 63 Wn. App. at 620.
The repudiation must consist of 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 Inv. Inc. v. Groves, 124
Wn.2d 881,898,881 P.2d 1010 (1994) (quoting Olsen Media v. Energy Scis., Inc., 32
Wn. App. 579, 585, 648 P.2d 493 (1982)). A party's "doubtful and indefinite statements"
suggesting only that it may not perform do not demonstrate repudiation. Wallace Real
Estate, 124 Wn.2d at 898.
Restatement (Second) ofContracts § 251 (1981 )-which sets forth the doctrine of
anticipatory repudiation by failing to give adequate assurances-provides:
(1) Where reasonable grounds arise to believe that the obligor will commit a breach by non-performance that would of itself give the obligee a claim for damages for total breach[,] the obligee may demand adequate assurance of due
performance and may, if reasonable, suspend any performance for which he has not already received the agreed exchange until he receives such assurance. (2) The obligee may treat as a repudiation the obligor's failure to provide within a reasonable time such assurance of due performance as is adequate in the circumstances of the particular case.
While this Restatement has been adopted for the sale of goods in RCW 62A.2.-609
and RCW 62A.2.-61 0, the Restatement and doctrine of adequate assurances has not yet
been accepted for general application. Even if we were to find the doctrine applicable to
real estate transactions, the doctrine does not support the Port's position.
Nothing in the record supports the Port's argument that WTC would not perform.
F or two years, WTC committed itself toward fulfilling, and did fulfill, all of the
conditions of the EMA. When the Port questioned WTC about WTC's corporate status
and Abraham's authority, Abraham and WTC's broker provided the Port with
documentation of WTC's corporate status and Abraham's authority. Both Abraham and
WTC's broker assured the Port of its desire to move forward and close the transaction,
offering to sign whatever documents the Port deemed necessary.
Moreover, regardless of Abraham's authority, WTC clearly ratified the EMA over
the two-year period it performed under the EMA. The corporate principal may impliedly
ratify the unauthorized contract of an officer agent. Barnes v. Treece, 15 Wn. App. 437,
443,549 P.2d 1152 (1976). There is no evidence that WTC sought to rescind the EMA.
No. 31673~4-III Grant County Port. Dist. v. Wash Tire Corp.
Rather, WTC consistently sought to close the transaction, and closing was prevented
solely by the actions of the Port. The trial court erred in declaring that WTC
anticipatorily breached the EMA.
B. Whether the EMA limits WTC's remedy to return ofits earnest money
WTC contends that the trial court erred by construing the EMA as providing an
exclusive remedy of return of its earnest money for the Port's breach. WTC contends that
the EMA does not limit its remedies, and that it may seek specific performance or
damages.
Washington follows the objective manifestation theory of contracts, looking for
"the parties' intent by its objective manifestations rather than looking at the parties'
unexpressed subjective intent." Paradiso v. Drake, 135 Wn. App. 329, 336, 143 P.3d 859
(2006). Courts should consider "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." Id. Courts interpret what was written rather than
intended to be written. JW Seavey Hop Corp. v. Pollock, 20 Wn.2d 337,348-49, 147
P.2d 310 (1944).
If a contract is subject to two interpretations, then the contract must be "interpreted
as to preserve the rights of all the parties, rather than be interpreted in such a way to
destroy the rights of either one." Asia Inv. Co. v. Levin, 118 Wash. 620, 628, 204 P. 808
(1922). Unless parties to a contract clearly and definitely decide to limit their rights,
courts will not interpret contract language to have that effect. Id.
The sentence of the EMA relating to seller's breach provides: "If Seller refuses to
complete the sale then Purchaser shall be entitled to rescission of this Agreement and
return of its earnest money." CP at 26. The EMA does not contain express language
excluding the right to damages or specific performance.
Paradise Orchards General Partnership v. Fearing, 122 Wn. App. 507,94 P.3d
372 (2004) controls the disposition of this issue. There, an earnest money agreement
provided that in the event of buyer's default, the seller'" shall have the right''' to
repossess the property and'" shall have the right'" to sell the apple crop and keep the
proceeds. Id at 518. The agreement further provided that the seller'" shall have no
obligation'" to refund the earnest money deposit. Id The court held:
By using the clauses "shall have the right" and "shall have no obligation" the paragraph unambiguously implies that the buyer has discretion to invoke the enumerated remedies. In other words ... the agreement does not specifY mandatory and exclusive remedies. Rather, it reserves the seller's right to invoke the enumerated remedies. No language in the agreement states the remedies are exclusive.
Id
Similarly here, the operative language states that if seller refuses to perform, then
buyer "shall be entitled" to rescission and return of its earnest money. As in Paradise
Orchards, this language unambiguously implies that the buyer has discretion to invoke, or
not to invoke, the enumerated remedies.
The Port cites Torgerson v. One Lincoln Tower, LLC, 166 Wn.2d 510,210 P.3d
318 (2009), in support of its position that the remedy provision in the EMA, quoted
above, provides an exclusive remedy. That case is factually distinguishable. There, the
remedy provision stated in relevant part, '" [A]ny default by Seller under this Agreement
... shall enable Buyer, as its sole and exclusive remedy, to terminate this Agreement and
recover from Seller the portion of the Deposit paid by Buyer.'" Id. at 515 (alterations in
original) (emphasis added). As noted above, there is no similar "exclusive remedy"
language in the EMA.
The Port next cites United Glass Workers' Local No. 188 v. Seitz, 65 Wn.2d 640,
399 P.2d 74 (1965) and contends that the exclusive remedy presumption for foreseeable
conditions applies to the EMA. In United Glass Workers, the union fined its member for
working behind an authorized picket line. Id. at 641. The constitution of the plaintiff
union provided for the imposition of fines on members for infraction of union rules. Id.
The constitution further provided in relevant part, '" In the event of non-compliance with
the decision handed down ... the member ... shall stand suspended from all privileges of
[union membership] until ... the decision ha[s] been complied with.'" Id. at 641·42.
When the member refused to pay the fine, the union brought suit. The member moved to
strike the complaint. The trial court treated the motion as one for summary judgment.
The trial court granted the member's motion, concluding that the constitution provided
the exclusive remedy for nonpayment of the fine, i.e., expUlsion from the union. Id. at
641. On appeal, the union argued that it had the option of expelling the member or
collecting the fine. Id. Our high court disagreed and held:
[W]hen parties to a contract foresee a condition which may develop and provide in their contract a remedy for the happening of that condition, the presumption is that the parties intended the prescribed remedy as the sole remedy for the condition, and this presumption is controlling where there is nothing in the contract itself or in the conditions surrounding its execution that necessitates a different conclusion.
Id. at 642. This rule has repeatedly been applied to construction cases where the parties
foresaw change orders or weather-related delays, and provided specific remedies for such
foreseen conditions. See, e.g., F.S. Jones Constr. Co. v. Duncan Crane & Rigging, Inc., 2
Wn. App. 509,468 P.2d 699 (1970); Donald B. Murphy Contractors, Inc. v. State, 40
Wn. App. 98, 696 P.2d 1270 (1985); s.L. Rowland Constr. Co. v. Beall Pipe & Tank
Corp., 14 Wn. App. 297, 540 P.2d 912 (1975).
As noted in United Glass Workers, the exclusive remedy presumption is
controlling unless (1) the contract itself or (2) the conditions surrounding its execution
necessitates a different outcome. United Glass Workers, 65 Wn.2d at 642. Here, the
contract itself necessitates a different outcome. As noted in Paradise Orchards, the
contract clause "shall have the right" "unambiguously implies that [the nonbreaching
party] has discretion to invoke [or not invoke] the enumerated remedies." Paradise
Orchards, 122 Wn. App. at 518. On this basis, United Glass Workers is distinguished.
Moreover, the conditions surrounding the contract's execution necessitate a
different outcome. Here, the parties knew that WTC would spend considerable time and
money toward complying with the EMA conditions. To conclude that the parties foresaw
that the seller would breach and intended nothing but return of WTC's own deposit would
allow the Port to commit a breach without consequence, despite WTC's anticipated
expenditure of significant resources of time and money. Parties do not enter into
contracts to allow one party to breach without consequences. Such a construction is
unreasonable, and courts must avoid construing contracts in a way that leads to absurd
results. City o/Tacoma v. City 0/Bonney Lake, 173 Wn.2d 584, 593, 269 P.3d 1017
(2012) (To avoid an absurd result, the court construed the contract so a contracting party
had a remedy against a breaching party.). We, therefore, hold that the exclusive remedy
No. 31673-4-111
presumption does not apply here when its application would allow a party to breach the
contract without consequences.
The remainder of this opinion has no precedential value. Therefore, it will be filed
for public record in accordance with RCW 2.06.040, the rules governing unpublished
opmlons.
C. Whether WTC 's promissory estoppel claim was properly dismissed
WTC challenges the trial court's order dismissing its claim for promissory
estoppel. To establish a claim for promissory estoppel, a plaintiff must show five
elements: '" (1) A promise which (2) the promisor should reasonably expect to cause the
promisee to change his position and (3) which does cause the promisee to change his
position
(4) justifiably relying upon the promise, in such a manner that (5) injustice can be avoided
only by enforcement of the promise.'" Farm Crop Energy, Inc. v. Old Nat 'I Bank of
Wash., 109 Wn.2d 923,939, 750 P.2d 231 (1988) (quoting Corbit v. J.! Case Co., 70
Wn.2d 522, 539,424 P.2d 290 (1967». Promissory estoppel is an alternative theory of
liability based on the absence of an express agreement. Tradewell Group, Inc. v. Mavis,
71 Wn. App. 120, 130, 857 P.2d 1053 (1993). The doctrine of promissory estoppel
addresses situations where consideration is lacking. Id. (quoting Hatfield v. Columbia
Fed. Sav. Bank, 57 Wn. App. 876, 885, 790 P.2d 1258 (1990)).
The trial court correctly dismissed WTC's claim for promissory estoppel. The
EMA was an express agreement backed by consideration. As previously stated, WTC's
promise to buy and submission of earnest money was given in return for the Port's
promise to sell, a promise we construe as having consequences. There was mutual
consideration for this promise. The trial court correctly dismissed WTC's promissory
estoppel claim.
D. Whether the Port must refund the money paid by WTC pursuant to the reversed summary judgment order
WTC requests that this court require the Port to refund the money the Port received
as attorney fees and costs should we reverse the first summary judgment order. Because
we conclude that the first summary judgment order was erroneous, we agree with WTC.
WTC is entitled to a refund of the money it paid to the Port.
E. Whether either party is presently entitled to an award ofattorney fees, costs, and expenses on appeal
The parties each request an award of attorney fees, costs, and expenses pursuant to
the EMA. The EMA provides for an award of reasonable attorney fees, and all costs and
expenses to the prevailing party. The parties' requests are premature because such an
No. 3 1673-4-III
award must abide the ultimate outcome of this litigation. See MRC Receivables Corp. v.
Zion, 152 Wn. App. 625, 631, 218 P.3d 621 (2009). At the conclusion of the proceedings
below, the trial court has authority to award the prevailing party reasonable attorney fees,
costs, and expenses, both at the trial court level, and for this appeal.
In conclusion, we reverse the summary judgment orders, hold that WTC did not
anticipatorily breach the EMA, and that the EMA does not provide an exclusive remedy
for the Port's breach.
Lawrence-Berrey, J.
WE CONCUR:
Brown, A.C.J.