Weyerhaeuser Real Estate Co. v. Stoneway Concrete, Inc.

637 P.2d 647, 96 Wash. 2d 558, 12 Envtl. L. Rep. (Envtl. Law Inst.) 20603, 1981 Wash. LEXIS 1360
CourtWashington Supreme Court
DecidedDecember 10, 1981
Docket47433-8
StatusPublished
Cited by18 cases

This text of 637 P.2d 647 (Weyerhaeuser Real Estate Co. v. Stoneway Concrete, Inc.) is published on Counsel Stack Legal Research, covering Washington Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Weyerhaeuser Real Estate Co. v. Stoneway Concrete, Inc., 637 P.2d 647, 96 Wash. 2d 558, 12 Envtl. L. Rep. (Envtl. Law Inst.) 20603, 1981 Wash. LEXIS 1360 (Wash. 1981).

Opinions

Hicks, J.

Petitioner, Stoneway Concrete, Inc., seeks reversal of a divided Court of Appeals decision which overturned the judgment of the trial court and ordered Stone-way to remit to Weyerhaeuser Real Estate Company additional rental payments under a mineral lease executed by these parties. Weyerhaeuser Real Estate Co. v. Stoneway Concrete, Inc., 26 Wn. App. 882, 614 P.2d 249 (1980). We reverse the Court of Appeals and reinstate the judgment of the trial court as modified.

The findings of fact entered by the trial court were unchallenged in the Court of Appeals and are verities here. On September 15, 1969, the parties entered into a 9-year mineral lease for the strip mining of sand and gravel on a tract of Weyerhaeuser land in south King County. The lease, which became effective January 1, 1970, provided for a basic minimum rental of $10,000 per year for the first 2 years and a minimum of $25,000 per year for each year thereafter. The lease further provided:

This basic minimum annual rental shall be due and payable irrespective of whether Lessee produces any minerals from the leasehold.

The parties were aware that many permits and considerable preliminary site work would be required before actual strip mining could commence. Stoneway promised to seek the necessary permits and agreed to strictly comply with all applicable zoning regulations. In return, Weyerhaeuser promised, inter alia,

to assist Lessee at all times in securing and maintaining such rezonings, zoning classifications and/or zoning permits as it may require for its contemplated operations hereunder.

Weyerhaeuser also promised to help Stoneway in obtaining pollution control permits as they may be required. Stone-way was given the option to terminate the lease as of the end of any contract year by giving 1 year's notice if in [561]*561Stoneway's "reasonable judgment the mining operations contemplated hereby have become uneconomical."

The mining operations required an unclassified use permit from King County, which Weyerhaeuser was to procure. The county planning department recommended to the council that a conditional permit be issued. Over public opposition, the King County Council granted the permit. There followed a referendum against the permit's issuance.

During litigation regarding the permit and referendum, Stoneway continued seeking other necessary permits. In April of 1971, Stoneway accused Weyerhaeuser of reneging on its obligation to assist in obtaining the necessary permits and for that reason paid no further rental installments. Stoneway, however, continued to participate in the litigation with its attorney carrying the major burden of it. This court ultimately resolved the litigated issues substantially in favor of the position of Stoneway and Weyerhaeuser. Durocher v. King County, 80 Wn.2d 139, 492 P.2d 547 (1972).

In the interim, the State Environmental Policy Act of 1971 (SEPA) became law, and a further lawsuit under that act regarding the unclassified use permit was filed and certified as a class action. At trial, the question was again resolved in favor of granting a permit; an appeal to this court was dismissed.

By January 1975, it was apparent that either the State Department of Ecology, King County, or both, on one ground or another, were going to require an environmental impact statement. The minimum cost of such a statement was estimated to be $35,000 with no assurance of the result that would follow even from a statement favorable to the project. In mid-1975, because of the costs anticipated and the uncertainty of the final result, Stoneway abandoned the project. It had conducted some site operations (test borings) but had extracted no minerals in quantity.

Weyerhaeuser commenced this lawsuit in January 1976. Stoneway raised several affirmative defenses, all refused by the trial court except one. The trial court held that Stone-[562]*562way had sustained the defense of commercial frustration and should be relieved of its obligations under the lease as of January 1, 1972, the outside limit of time that the parties had expected it might take to obtain the necessary permits.

A divided Court of Appeals reversed. Weyerhaeuser Real Estate Co. v. Stoneway Concrete, Inc., supra. The majority held that the doctrine of commercial frustration did not apply to the case because (1) the parties had agreed upon a remedy in the event the project became economically unfeasible, and (2) the payment of rent was not conditioned on Stoneway's success in extracting minerals from the site. We agree with the dissenting voice of the Court of Appeals, and hold that the trial court was correct on the issue of frustration.

The doctrine of commercial frustration may be summarized as follows:

Where the assumed possibility of a desired object or effect to be attained by either party to a contract forms the basis on which both parties enter into it, and this object or effect is or surely will be frustrated, a promisor who is without fault in causing the frustration, and who is harmed thereby, is discharged from the duty of performing his promise unless a contrary intention appears.

Restatement of Contracts § 288, at 426-27 (1932). See also 18 S. Williston, Contracts § 1954 (3d ed. 1978); 6 A. Corbin, Contracts §§ 1355, 1356 (1962).

There can be no doubt of the desired object or purpose of Stone way in entering the mineral lease with Weyerhaeuser. Nor is there any question that the purpose of Stoneway forms the basis on which both parties entered the lease.

The trial court's finding of fact No. 3 states:

At all times material prior to the execution of the lease and subsequent thereto, defendant was engaged in the production and sale of sand, gravel and other aggregates and materials, and in the sale of concrete and various asphalt mixes. Prior to the lease, defendant's source of materials had diminished to a considerable extent, and it was in need of an extensive deposit of materials of this [563]*563kind. Studies which the plaintiff has made and which had been reviewed by the defendant indicated that the property of plaintiff, a tract of some 508 acres situated near Soos Creek in southern King County, would provide an excellent source for such materials.

(Italics ours.)

That Stoneway's purpose of obtaining sand, gravel and other aggregates by strip mining the leased premises was frustrated by its inability to obtain the necessary permits is unchallenged. Stoneway was without fault in the occurrence of the supervening event causing the frustration of its purpose. There remains only the question of whether the parties contemplated the possibility of nonissuance of required permits and provided for that contingency in the lease, thereby allocating that risk to one party or the other.

The parties appear to be in agreement that disposition of this case turns on whether the frustrating event was foreseeable.

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Weyerhaeuser Real Estate Co. v. Stoneway Concrete, Inc.
637 P.2d 647 (Washington Supreme Court, 1981)

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Bluebook (online)
637 P.2d 647, 96 Wash. 2d 558, 12 Envtl. L. Rep. (Envtl. Law Inst.) 20603, 1981 Wash. LEXIS 1360, Counsel Stack Legal Research, https://law.counselstack.com/opinion/weyerhaeuser-real-estate-co-v-stoneway-concrete-inc-wash-1981.