IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
HARTY INVESTMENT GROUP, LLC, a Washington limited liability company, ) No. 77267-8-I
Respondent, ) DIVISION ONE ) v. ) CHG SF, LLC, a Washington limited ) liability company, ) UNPUBLISHED OPINION ) Appellant. ) FILED: March 11,2019
SMITH, J. — CHG SF LLC (CHG) appeals the trial court’s grant of summary
judgment in favor of Harty Investment Group LLC (Harty Group) and the court’s
dismissal of CHG’s counterclaims against Harty Group. Because CHG failed to
raise a genuine issue of material fact regarding whether it anticipatorily
repudiated its agreement with Harty Group, summary judgment was proper.
Therefore, we affirm.
FACTS
Harty Group and CHG are companies engaged in buying, developing, and
selling real property. In March 2016, Harty Group and CHG entered into a real
estate purchase and sale agreement (PSA) whereby CHG agreed to purchase
certain property located in Kirkland (Property) from Harty Group. The purchase
price for the Property was $2,816,000, and CHG made an earnest money deposit No. 77267-8-1/2
of $140,800. The earnest money deposit was secured by a deed of trust
encumbering the Property.
The PSA contained an “Engineering Approval” provision that provides, in
relevant part:
As used herein, “Engineering Approval” means that (a) the Permitting Jurisdiction has approved Seller’s engineering and construction plans for its intended residential development on the Property, and (b) all appeal periods, if any, have expired or any appeals have been successfully concluded, as the case may be. Seller shall use diligent and good faith efforts to obtain Engineering Approval, at Seller’s sole cost and expense as soon as reasonably possible. If Seller is unable to obtain Engineering Approval by Outside Closing Date, unless Purchaser waives the requirement for Engineering Approval in writing, this Agreement shall terminate, and upon such termination any and all Earnest Money previously deposited .shall be returned to Purchaser. Before submitting . .
any plans, modifications, or appeals or other materials for Engineering Approval to the Permitting Jurisdiction, Seller shall submit such applications or materials to Purchaser for Purchaser’s prior written approval, which approval shall not be unreasonably withheld and shall be deemed granted if Purchaser fails to respond with written notice of disapproval within 5 business days after receipt of such applications or material from Seller.th]
The “Permitting Jurisdiction” was the city of Kirkland (City), and the “Outside
Closing Date” was December 31, 2016.
It is undisputed that one of the components of Engineering Approval was
the City’s approval of a land surface modification (LSM) permit to develop the
Property. Harty Group applied for the LSM permit, and on October 11, 2016, the
City provided comments to the engineering plans for the LSM permit. On
October 25, 2016, Harty Group’s principal, Luay Joudeh, met with Michael
Lorenz and Aron Golden of CHG to discuss the City’s comments. On October
1 (Bold in original.)
2 No. 77267-8-1/3
27, 2016, Joudeh sent Lorenz and Golden an e-mail providing, in relevant part:
Gentlemen
We are submitting revised LSM plans and reports to City for final review. Once the LSM is approved, I will have met the condition of closing.
Golden responded via e-mail that “[w]e want to be sure what you resubmit will
work for us.” He mentioned in his e-mail concerns regarding the revised plans
and expressed that “[i]t would be good to go over items prior to resubmittal.”
Joudeh e-mailed the revised LSM plans to Golden and Lorenz on October 27,
2016, and Golden confirmed receipt.
On November 9, 2016, Lorenz e-mailed Joudeh as follows:
Luay
Bad news. We have completed our estimates for the modified [LSMJ plans that you have produced based on the City’s input.
The increase in combined costs has exceeded our original estimates by $338,045.
This is clearly a significant impact.
We have held prices on the homes as high as we could be [sic] are not able to cover the cost impacts.
I propose that we reduce the land price to $2,475,000 and keep going. We will need to execute on one extension for the Closing.
If this doesn’t work then we’ll have to terminate the transaction finding the Engineering Approval Contingency unsatisfactory.
I’m really surprised that the City has layered so many expensive requirements on this small project it’s tough to spread that cost —
amongst the 11 lots.
I’ll call you to go over this.
3 No. 77267-8-1/4
Harty Group declined to reduce the price for the Property, and the sale of
the Property ultimately did not close. CHG demanded a return of its earnest
money and in January 2017 declared a default under the deed of trust securing
the earnest money deposit. On February 14, 2017, Harty Group sued for breach
of contract and to enjoin CHG’s foreclosure of the deed of trust. CHG
counterclaimed for breach of contract and foreclosure. Harty Group moved for
summary judgment, arguing that Lorenz’s November 9, 2016, e-mail constituted
an anticipatory repudiation of the PSA. The trial court granted Harty Group’s
motion and summarily dismissed CHG’s counterclaims. CHG appeals.
DISCUSSION
Summary Judgment
CHG argues that the trial court erred by summarily concluding that
Lorenz’s November 9, 2016, e-mail constituted an anticipatory repudiation of the
PSA.2 We disagree.
We review summary judgment orders de novo, viewing all evidence and
reasonable inferences in the light most favorable to the nonmoving party. Keck
v. Collins, 184 Wn.2d 358, 370, 357 P.3d 1080 (2015). “[S}ummary judgment is
appropriate where there is ‘no genuine issue as to any material fact and . . . the
moving party is entitled to a judgment as a matter of law.” Elcon Constr., Inc. v.
E. Wash. Univ., 174 Wn.2d 157, 164, 273 P.3d 965 (2012) (second alteration in
original) (quoting CR 56(c)). Once the moving party shows there are no genuine
2 The trial court did not enter written conclusions. But anticipatory repudiation was the only theory argued in Harty Group’s motion for summary judgment. 4 No. 77267-8-1/5
issues of material fact, “[t]he nonmoving party may not rely on speculation,
argumentative assertions, ‘or in having its affidavits considered at face value; for
after the moving party submits adequate affidavits, the nonmoving party must set
forth specific facts that sufficiently rebut the moving party’s contentions and
disclose that a genuine issue as to a material fact exists.” Becker v. Wash. State
Univ., 165Wn. App. 235, 245-46, 266 P.3d 893 (2011) (quoting Seven Gables
Corp. v. MGM/UAEntm’tCo., 106 Wn.2d 1,13,721 P.2d 1(1986)).
An anticipatory repudiation occurs “when one of the parties to a bilateral
contract either expressly or impliedly repudiates the contract prior to the time of
performance.” Wallace Real Estate mv., Inc. v. Groves, 124 Wn.2d 881, 898,
881 P.2d 1010 (1994). “A party’s intent not to perform may not be implied from
doubtful and indefinite statements that performance may or may not take place.”
Wallace Real Estate, 124 Wn.2d at 898. “Rather, an anticipatory breach is a
‘positive statement or action by the promisor indicating distinctly and
unequivocally that he either will not or cannot substantially perform any of his
contractual obligations.” Wallace Real Estate, 124 Wn.2d at 898 (internal
quotation marks omitted) (quoting Olsen Media v. Energy Scis., Inc., 32 Wn. App.
579, 585, 648 P.2d 493 (1982)). An anticipatory repudiation occurs when one
party states its intention not to perform except under additional terms that go
beyond the contract. Highlands Plaza, Inc. v. Viking Inv. Corp., 72 Wn.2d 865,
878, 435 P.2d 669 (1967) (concluding that party anticipatorily breached contract
by demanding other party’s performance before it was due); see ~ 17A AM.
JUR. 2D Contracts § 695 at 676 (2016) (“Language that amounts to a statement of
5 No. 77267-8-1/6
intention that one will not perform except on conditions that go beyond the
contract, or unless the other party meets additional terms, constitutes a
repudiation.”); RESTATEMENT (SECOND) OF CONTRACTS § 250 cmt. b at 273 (AM. LAW INST. 1981) (“[Ljanguage that under a fair reading ‘amounts to a statement of
intention not to perform except on conditions which go beyond the contract’
constitutes a repudiation.”) (quoting U.C.C. § 2-610 cmt. 2 (1978)). Although anticipatory repudiation is a question of fact, it can be decided on summary
judgment “if, taking all evidence in the light most favorable to the non-moving
party, reasonable minds can reach only one conclusion.” Alaska Pac. Trading
Co. v. Eagon Forest Prods., Inc., 85 Wn. App. 354, 365, 933 P.2d 417 (1997).
Here, Lorenz’s November 9, 2016, e-mail to Joudeh unequivocally stated
that CHG planned to terminate the PSA unless Harty Group agreed to lower the
purchase price from $2,816,000 to $2,475,000, a reduction of $341,000. And
although Lorenz indicated in his e-mail to Joudeh that CHG would terminate by
“finding the Engineering Approval Contingency unsatisfactory,” CHG had no right
to terminate under the Engineering Approval provision or to deem that condition
unsatisfactory. Rather, the fulfillment of the Engineering Approval condition
depended solely on the City’s—not CHG’s—approval of the relevant engineering
and construction plans. In short, Lorenz’s November 9, 2016, e-mail was an
unambiguous statement that CHG would wrongfully terminate the transaction
unless Harty Group agreed to modify a material term of the PSA, the purchase
price. Therefore, reasonable minds could reach but one conclusion: CHG
repudiated by stating its intent not to perform unless Harty Group agreed to a
6 No. 77267-8-1/7
condition that went beyond the contract. For these reasons, summary judgment
was proper.
CHG argues that the trial court nonetheless erred by failing to address
whether Harty Group completed its performance under the Engineering Approval
provision. Specifically, CHG cites Wallace Real Estate for the proposition that
Harty Group was required to establish its own performance. But CHG’s reliance
on Wallace Real Estate is misplaced. In that case, the court did state the general
rule that ‘[i]f a contract requires performance by both parties, the party claiming
nonperformance of the other must establish as a matter of fact the party’s own
performance.” Wallace Real Estate, 124 Wn.2d at 897. But the court then
concluded that the buyer in that case anticipatorily repudiated by sending the
sellers a letter indicating he would not be able to close on the agreed-upon date
and requesting an extension. Wallace Real Estate, 124 Wn.2d at 898.
Accordingly, the sellers’ performance of their contractual obligations was
excused. Wallace Real Estate, 124 Wn.2d at 899. If anything, Wallace Real
Estate supports Harty Group and confirms both that (a) CHG’s request for a price
reduction constituted repudiation, and (b) because CHG repudiated, Harty
Group’s performance was excused.
Puqet Sound Service Corporation v. Bush, 45 Wn. App. 312, 724 P.2d
1127 (1986), is also instructive here and confirms that Harty Group’s
performance was excused because CHG repudiated when Harty Group still had
time to perform. In Puqet Sound, Robert and Lee Bush entered into an
agreement to purchase a condominium with private moorage from Puget Sound
7 No. 77267-8-1/8
Service Corporation (Puget Sound). Puget Sound, 45 Wn. App. at 314. Shortly
before the closing, the Bushes tried to moor their boat in their assigned slip and
experienced difficulty because the slip was not as large as Puget Sound had
represented itto be. Puget Sound, 45 Wn. App. at 315. The Bushes advised
Puget Sound of the issue, and Puget Sound responded that the problem would
be remedied. Puget Sound, 45 Wn. App. at 315. But the Bushes did not believe
that the slip would be made to conform, sent a letter to Puget Sound indicating
that they were rescinding the transaction, and demanded the return of their
earnest money. Puget Sound, 45 Wn. App. at 315.
Puget Sound sued the Bushes for breach of contract, and the trial court
concluded that the Bushes improperly rescinded the agreement. Puget Sound,
45 Wn. App. at 315. But the court nonetheless dismissed Puget Sound’s claim,
concluding that Puget Sound had failed to demonstrate that a condition
precedent to closing would have been satisfied—namely, that Puget Sound’s
owner would provide the Bushes with financing for the purchase on specified
terms. Puget Sound, 45 Wn. App. at 315-16. The court noted that although the
Bushes’ loan application was approved, the terms of the financing were not
consistent with the terms specified in the agreement. Puget Sound, 45 Wn. App.
at 316.
We reversed, reasoning: “Since Puget Sound still had time to comply with
the condition precedent, the Bushes’ action excused Puget Sound’s
performance.” Puget Sound, 45 Wn. App. at 318. We explained:
The Bushes’ repudiation excused Puget Sound from performing the condition precedent of acquiring the agreed
8 No. 77267-8-1/9
financing. It was not necessary for Puget Sound to prove as part of its cause of action that it would have satisfied the condition precedent prior to closing. The burden of proof was on the Bushes to demonstrate that, despite their improper repudiation, the condition precedent of providing the required financing would not have been satisfied. The trial court erroneously placed the burden of proof on [Puget Sound].
Puqet Sound, 45 Wn. App. at 319 (emphasis added) (citation omitted).
Here, as in Puciet Sound, Harty Group still had time to comply with the
Engineering Approval provision when CHG repudiated. Specifically, it is
undisputed that a 30-day appeal period applies to the relevant City approvals
under the Engineering Approval provision. And “Engineering Approval” means
not only that the City has approved the relevant engineering and construction
plans but also that all appeal periods have expired. Accordingly, to satisfy
Engineering Approval by December 31, 2016, Harty Group had until December
1,2016, at the latest to obtain the City’s approval of the relevant plans.
Nonetheless, Lorenz sent his repudiatory e-mail to Joudeh on November 9,
2016—a full three weeks earlier. Here, as in Puqet Sound, CHG’s premature
repudiation excused Harty Group from obtaining Engineering Approval.
Therefore, we are not persuaded by CHG’s argument that Harty Group was
required to establish its own performance.
CHG attempts to distinguish Puciet Sound by arguing that CHG construed
Joudeh’s October 27, 2016, e-mail as a refusal to complete a required storm
water vault design for the Property and that, unlike Puget Sound, Harty Group did
not provide any assurances that it would complete its performance. But in Puqet
Sound, the Bushes advised Puget Sound of the problem with the slip before
9 No. 77267-8-1/10
repudiating on that basis. Puqet Sound, 45 Wn. App. at 315, 317. By contrast,
CHG does not point to any evidence that it advised Harty Group, before
repudiating, that it construed Joudeh’s e-mail as a refusal to provide the vault
design, or that CHG considered that refusal a breach of the PSA. Thus, unlike
Puget Sound, Harty Group had no occasion to offer any assurances. CHG’s
argument is unpersuasive.
CHG next argues that it overcame any “presumption” of performance
under Puget Sound by demonstrating that Harty Group “did not, and could not,
fully perform its end of the bargain.” But CHG does not point to any evidence
that creates a genuine issue of material fact on this matter. CHG first points to
evidence of a dispute about whether a storm water vault design was part of the
Engineering Approval requirement. We need not resolve that dispute because
even assuming that the vault design was part of the requirement, CHG has not
raised a genuine issue of material fact as to whether Harty Group would have
timely obtained Engineering Approval if CHG had not repudiated. Specifically,
CHG, which under Puqet Sound bears the burden of proof on this issue, has not
pointed to any evidence that rebuts Joudeh’s declaration testimony that the
engineering design for a storm water vault costs about $4,000 to $5,000 and can
be obtained in a week or less. CHG points out that the vault design ultimately
was not completed until December 9, 2016, but that fact alone does not create a
genuine issue of material fact as to whether the design would have been timely
completed had CHG not repudiated. Furthermore, CHG has not cited any
evidence from which the court could make a reasonable inference that had CHG
10 No. 77267-8-1/1 1
indicated to Harty Group before repudiating that CHG considered Joudeh’s
October 27, 2016, e-mail a breach of the PSA, Harty Group would have insisted
on not providing the vault design.
CHG also points to the fact that Harty Group did not obtain a right-of-way
permit from Puget Sound Energy or apply for a right-of-use permit from
Northshore Utility District and did not take action on these claimed deficiencies
until it was too late to meet the deadline for Engineering Approval. But the
Engineering Approval provision does not require Harty Group to obtain approvals
from utilities—it only requires approval from the “Permitting Jurisdiction,” which is
the City.3 In short, CHG has not cited any evidence in the record that creates a
genuine issue of material fact as to whether, absent CHG’s repudiation, Harty
Group would have timely obtained Engineering Approval. Accordingly, CHG’s
argument that it has overcome the “presumption” that Harty Group could have
performed is unpersuasive.
Relying on an excerpt from American Jurisprudence 2d, CHG next argues
that Joudeh’s e-mail constituted a breach of the PSA because his e-mail
indicated that Harty Group was refusing to provide a storm water vault design.
But the excerpted section of American Jurisprudence 2d does not help CHG
here. It provides:
[W]here the parties differ as to the interpretation of a contract, a demand that the contract be performed according to one party’s interpretation does not constitute a repudiation, unless the demand
~ By way of contrast, “Preliminary Plat Approval” requires the approval of the Permitting Jurisdiction “and all other governmental agencies or utilities with jurisdiction over the Property.” 11 No. 77267-8-1/12
is accompanied by a clear expression of the intent not to perform under any other interpretation.
17A AM. JUR. 2D Contracts § 695 at 676 (emphasis added). Joudeh’s October 27, 2016, e-mail merely states that “[o]nce the LSM is approved, I will have met
the condition of closing.” This statement was not accompanied by any clear
expression of an intent not to perform under any interpretation of the PSA other
than an interpretation under which the vault design was excluded from
Engineering Approval. CHG’s argument is not persuasive.
CHG also asserts that Lorenz’s November 9, 2016, e-mail was merely an
exercise of CHG’s contractual rights under the Engineering Approval provision.
But CHG does not specify what right it refers to, and as discussed, the
Engineering Approval provision did not give CHG a right to terminate the PSA.
CHG did have a right under that provision to approve the LSM plans before Harty
Group submitted them to the City. But CHG’s argument that Lorenz’s November
9, 2016, e-mail was intended to communicate CHG’s disapproval of the LSM
plans is not persuasive because Lorenz’s e-mail does not contain any statement
that could reasonably be construed as a notice of disapproval of the LSM plans.
Furthermore, by November 9, 2016, the LSM plans were already deemed
approved under the Engineering Approval provision. Specifically, that provision
states materials are deemed approved by CHG if CHG fails to respond with
written notice of disapproval within five business days after receipt. CHG does
not dispute that it received the LSM plans from Joudeh on October 27, 2016.
And although CHG argues that plans were later uploaded to a Dropbox account
that Harty Group set up for the transaction, CHG does not point to any evidence
12 No. 77267-8-1113
in the record to rebut Joudeh’s testimony that the plans he uploaded to Dropbox
a few days later were the same plans that CHG acknowledged receiving on
October 27.~ Because CHG received the plans on October 27, Lorenz’s
November 9 e-mail was sent after the five-business-day objection window.
Again, CHG’s argument that Lorenz’s November 9, 2016, e-mail was simply an
exercise of its contractual rights is unpersuasive.
CHG next contends that Lorenz’s November 9, 2016, e-mail was ‘not so
‘positive,’ ‘unequivocal,’ or ‘certain’ that CHG would not perform.” CHG relies on
the following excerpt from American Jurisprudence 2d to support its argument:
It must be reasonably certain that the promisor will not perform in a timely manner. A party’s intent not to perform may not be implied from doubiful or indefinite statements whether performance may take place. . .Thus, a threat to abandon .
contract obligations or a mere assertion that one will be unable or will refuse to perform is not sufficient.
17AAM. JUR. 2D Contracts § 692 at 674 (2016) (footnotes omitted). But another section of American Jurisprudence 2d more specifically addresses the scenario
where, as here, the claim of repudiation is based on a demand for modifications
to the agreement:
An anticipatory breach must be an unequivocal repudiation; thus, a mere request for negotiations to change the terms of the contract or to cancel it is not sufficient. To constitute an anticipatory breach based upon a request for a modification of terms, the request must be coupled with an absolute refusal to perform unless the request is granted.
17A AM. JuR. 2D Contracts § 696 at 677 (2016) (emphasis added) (footnotes
~ For this reason, any dispute about whether the Dropbox account was updated on November 1 or November 2 is immaterial. 13 No. 77267-8-1114
omitted).
Here, CHG not only requested to negotiate a price reduction for the
Property but also coupled its proposed price reduction with an unequivocal
statement that it would terminate the PSA unless Harty Group agreed to the
reduction. This was a repudiation, and CHG’s arguments that Lorenz was
merely making an “offer” or “proposal” are not persuasive.
As a final matter, CHG argues that this court should not limit its focus to
Lorenz’s November 9, 2016, e-mail. CHG urges us to consider the
communications that followed that e-mail, arguing that the court must consider
this “surrounding background” in determining whether CHG repudiated.
Specifically, CHG points to a December 12, 2016, letter from CHG’s counsel to
Harty Group’s counsel listing various approvals that remained outstanding. CHG
also refers to Lorenz’s declaration testimony that “CHG viewed Harty’s assertion
that it had fully satisfied its contractual obligations as a breach,” and that he and
Joudeh had a call on November 9, 2016, but ‘[tb my dismay, Mr. Joudeh was
unwilling to negotiate a reasonable business solution to move forward in light of
Harty’s failure to provide all components of the engineering and construction
plans per [the Engineering Approval provision].” But Lorenz’s November 9, 2016,
e-mail was unambiguous: Developing the Property would cost more than CHG
anticipated, and CHG would terminate unless Harty Group agreed to reduce the
purchase price. CHG’s after-the-fact assertion through counsel that Harty Group
breached the Engineering Approval provision does not create a genuine issue of
material fact, see Becker, 165 Wn. App. at 245-46 (party may not rely on
14 No. 77267-8-1/15
argumentative assertions to defeat summary judgment), and neither does the
fact that Harty Group and its counsel engaged in efforts to salvage the
transaction after November 9. And finally, Lorenz’s subjective but
uncommunicated belief that his e-mail was a “reasonable business solution” to a
perceived breach does not create a genuine issue of material fact, particularly
where CHG has pointed to no evidence in the record that CHG told Harty Group,
before repudiating, that it believed Harty Group was in breach based on Joudeh’s
October 27, 2016, e-mail. See 17A AM. JUR. 2D Contracts § 692 at 673-74 (promisor’s uncommunicated subjective intent not relevant to whether repudiation
occurred).
Simply put, where CHG unambiguously cited increased costs as its sole
reason for terminating, it cannot create a genuine issue of material fact by
attempting to justify that termination after the fact by arguing that Harty Group
breached. Pearcev. Puqet Sound Broad. Co., 170 Wash. 472,481,16 P.2d 843
(1932) (“{W}hen one party terminates a contract for an express reason, he cannot
thereafter sustain his action by specifying another breach not referred to at the
time, but which, if referred to, could have been cured.”).
Attorney Fees and Costs
Harty Group requests attorney fees and costs on appeal under the PSA,
which provides: “In any litigation or other proceeding arising out of this
Agreement, the substantially prevailing party shall be entitled to an award of its
reasonable attorneys’ fees and other costs incurred therein.” Where a contract
“specifically provides that attorneys’ fees and costs, which are incurred to enforce
15 No. 77267-8-1/16
the provisions of such contract. . . shall be awarded to one of the parties, the
prevailing party. . . shall be entitled to reasonable attorneys’ fees in addition to
costs and necessary disbursements.” RCW 4.84.330. This entitlement applies
on appeal. Reeves v. McClain, 56 Wn. App. 301, 311 783 P.2d 606 (1989).
Because Harty Group is the prevailing party on appeal, we award Harty Group its
reasonable attorney fees and costs on appeal subject to its compliance with
RAP 18.1(d).
We affirm.
WE CONCUR:
a