West Coast, Inc. v. Camano Co-operative Water & Power, Co. ( 2013 )

2013NOV-I* Ai-il|:08
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
WEST COAST, INC., a Washington
corporation, No. 69255-1-1
Appellant, DIVISION ONE
v. UNPUBLISHED OPINION
CAMANO CO-OPERATIVE WATER
AND POWER COMPANY, a
Washington corporation,
Respondent. FILED: November 4, 2013
Grosse, J. — A contract missing material terms is nothing more than an
agreement to agree, unenforceable as a matter of law. Here, the location of the
water pipes was an essential element of the parties' agreement to install pipe for
water distribution to the proposed housing sites. Because the parties did not
agree to where the water pipes would be located, there was no "meeting of the
minds" on the essential terms and, thus, no contract. We affirm the trial court's
decision that there was no contract.
The trial court awarded Camano Co-Operative Water and Power
Company (Co-op) a judgment for unpaid dues and assessments owed on 21
shares purchased by West Coast, Inc. The purchase of 20 of those shares was
conditioned upon approval of the development of the land. Such approval could
not occur without the installation of the water pipe. No water pipe was installed.
Thus, there was no contract. We reverse the trial court's award on the Co-op's
counterclaim against West Coast of dues for the 20 shares.
No. 69255-1-1/2
FACTS
In January 2004, West Coast signed a purchase and sale agreement for
property on Camano Island with the intent of developing single family homes on
the property, known as Saratoga Ridge. In order to develop the land, Island
County required West Coast to provide a fire hydrant with sufficient water flow to
the property site for fire services. Water was provided by the Co-op, a small
cooperative utility owned by the residential property owners on the west side of
Camano Island. The Co-op contracts with Water & Wastewater Services, LLC,
owned by Kelly Wynn, to manage the water system.
John Robinett, the principal of West Coast, contacted Wynn and the Co
op board regarding water requirements. Wynn faxed Robinett a two-page
memorandum and three pages of drawings of the water distribution system
created by the Co-op's engineer, George Bratton, for a previously interested
party. The drawings depict the existing water system in the area in 2004. The
drawings show the location of the only 4-inch water main to be on the west side
of West Camano Drive. The Bratton memorandum contained two options for
installing the required fire flow to Saratoga Ridge. Option one was from the
south; option two approached from the north. Robinett wanted to pursue option
one, which would provide 500 gallons per minute. The Bratton memorandum
described option one as "1,910 feet of 4-inch AC [(asbestos cement)] pipe on
West Camano Dr. south of Uplands road." Sometime after the Bratton
memorandum was created, the word "south" was crossed out of that phrase and
the word "north" was handwritten in.
No. 69255-1-1/3
At the same time, the Co-op wanted to improve its antiquated water
system and orally agreed to cost share with West Coast, intending to make the
needed upgrades at the same time West Coast installed a new main line. This
was never put into writing.
In February 2005, Bratton prepared bid documents for installing the water
main. Those documents were approved by the Co-op and forwarded to the
Department of Health (Department). The Department eventually granted
approval after certain adjustments. The approval was then sent to West Coast,
which balked because the plans required three crossovers and eleven residential
service connections on its installation of an 8-inch water main, significantly
increasing the project's cost.
West Coast sued the Co-op for breach of contract/anticipatory repudiation,
negligent and intentional misrepresentation, and estoppel. The complaint alleged
that the Co-op violated its agreement to cost share and thus breached the
contract. On April 4, 2011, the trial court granted summary judgment dismissal of
West Coast's complaint, finding that the cost-sharing claim was based on an oral
agreement and was time barred because more than three years had elapsed.
On reconsideration, the trial court re-affirmed its decision dismissing the
action for cost sharing as time barred but determined that there was still an issue
about whether the Co-op had placed additional conditions on its agreement as
alleged in the complaint. The Co-op then brought a counterclaim for unpaid
membership fees due for West Coast's purchase of 20 additional shares. After a
bench trial on the remaining issues, the court found that there was no binding
No. 69255-1-1/4
agreement between the parties and dismissed the breach of contract claim. The
court found in favor of the Co-op on its counterclaim for money owing on the
shares for the Co-op. Because the Co-op bylaws provided for attorney fees, the
court also awarded fees and costs expended for that portion of the litigation.
West Coast appeals.
ANALYSIS
"The touchstone of contract interpretation is the parties' intent."1
Washington courts follow the "objective manifestation" theory of contracts.2 A
valid contract requires an objective manifestation of mutual assent to its terms,
rather than any unexpressed subjective intent of the parties.3 Courts will not
impose obligations that the parties did not assume for themselves.4 A formation
of a contract requires that there be an objective manifestation of mutual assent of
both parties.5 Intent may be imputed based on the ordinary meaning of the
words within the contract.6 Words in a contract are given their ordinary, usual,
and popular meaning unless the entirety of the agreement clearly demonstrates a
contrary intent.7
1 Tanner Elec. Coop, v. Puaet Sound Power & Light Co.. 128 Wash. 2d 656, 674,
911 P.2d1301 (1996).
2 Hearst Commc'ns. Inc. v. Seattle Times Co.. 154 Wash. 2d 493, 503, 115 P.3d
262 (2005); State v. R.J. Reynolds Tobacco Co., 151 Wash. App. 775, 783, 211
P.3d 448 (2009).
3 Hearst. 154 Wash. 2d at 503.
4 Condon v. Condon. 177 Wash. 2d 150, 162-63, 298 P.3d 86 (2013).
5 P.E.Svs..LLCv.CPICorp., 176 Wash. 2d 198, 207, 289 P.3d 638 (2012).
6 Hearst. 154 Wash. 2d at 503.
7 Hearst, 154 Wash. 2d at 504 (citing Universal/Land Constr. Co. v. City of Spokane.
49 Wash. App. 634, 637, 745 P.3d 53 (1987)).
No. 69255-1-1/5
There must be agreement on the essential terms to give rise to a
contract.8 The findings of fact are critical to the resolution ofwhetherthere was a
contract and those findings are reviewed to determine whether substantial
evidence exists to support them.9 The application of the law to the facts is a
question of law and subject to de novo review.10 The court reviews de novo the
trial court's conclusions of law to determine if they are supported by the findings
offact.11 Unchallenged findings offact are verities on appeal.12
The trial court entered extensive findings of fact and conclusions of law
which support its ruling that West Coast's breach of contract claim was based on
a complete misunderstanding of the water system along West Camano Drive.
West Coast believed it was replacing a 4-inch main located along the east side of
West Camano Drive with an 8-inch PVC (polyvinyl chloride) pipe to be installed
on that same side. West Coast relied on a misinterpretation of the Bratton
memorandum, thinking that its chosen option, option one, described work "north"
of Uplands Road, when in reality it described work "south" of Uplands Road.13
Unchallenged finding of fact 13 states that the only 4-inch main on the street was
located on the west side.
8 Condon.177 Wn.2d at 208-09.
9 Sunnvside Valley Irr. Dist. v. Dickie. 149 Wash. 2d 873, 879, 73 P.3d 369 (2003).
10 Brundridae v. Fluor Fed. Servs.. Inc.. 164 Wash. 2d 432, 441, 191 P.3d 870
(2008).
11 Bingham v. Lechner. 111 Wash. App. 118, 127, 45 P.3d 536 (2002) (citing City of
Seattle v. Megrev. 93 Wash. App. 391, 393, 968 P.2d 900 (1998)).
12 BrundridgerT6"4 Wn.2d at 439-40.
13 Exhibit 71 shows Bratton's memorandum with the word "south" struck out and
replaced with the handwritten word "north."
No. 69255-1-1/6
The parties' discussions "never resolved how West Coast's new water
main was going to 'replace' the existing main, [or] how existing customers would
be reconnected (if at all)." Indeed, Robinett testified about a letter he sent
transmitting his signed extension agreement in which he acknowledged that the
contract had missing elements. Robinett admitted on cross-examination that the
agreement does not specifically state where the 8-inch pipe would be placed or
in which direction any pipe laying would start.
Placement of the 8-inch pipe was an essential element of the agreement.
The court's extensive findings support its conclusion that there was no objective
manifestation of this essential element. The trial testimony showed that each
party objectively manifested different intents, and thus, there was no "meeting of
the minds" on how the agreement would work.14 There was, therefore, no
enforceable contract.
Nor is there any merit to West Coast's claim for promissory estoppel.
"Promissory estoppel requires the existence of a promise. A promise is a
manifestation of intention to act or refrain from acting in a specified way, so made
as to justify a promissee in understanding that a commitment has been made."15
Here, there is no promise. The mere fact that there is a written document entitled
"Agreement" is insufficient to sustain a finding that there was, in fact, a valid
contract. We affirm the trial court's holding that no contract existed.
14 In re G.W.-F. 170 Wash. App. 631, 640, 285 P.3d 208 (2012).
15 Tacoma Auto. Mall. Inc. v. Nisssan N. Am., Inc.. 169 Wash. App. 111, 127, 279
P.3d 487 (2012) (internal quotation marks and citations omitted).
No. 69255-1-1/7
Counterclaim for dues owed Co-op
The trial court determined that West Coast owed the Co-op $107,894.65
in past dues for its 21 shares. As an owner of the undeveloped land, West Coast
owned one share in the Co-op. When West Coast learned that the cost of
shares was increasing from $5,000 to $7,000, West Coast purchased 20
additional shares for the proposed home sites on the property. When West
Coast transmitted the $100,000 check for payment of the 20 additional shares, it
did so with the following letter:
Please find enclosed a check for $100,000 to pay for 20 water
shares for the Plat of Saratoga Ridge. It is understood that there is
currently a share that runs with the existing lot. In the event that
the Plat was not approved as proposed or approved for less than
the proposed 21 lots, West Coast, Inc. may sell back to the Co-op
any unused water shares for the same price they were purchased
for ($5,000.00).
West Coast contends that this conditional offer was accepted by the Co-op when
it cashed the check. Because West Coast's version of the placement of the
water pipes was not accepted, it contends that the Co-op is obligated to
purchase those back. West Coast is incorrect. The letter merely states that
West Coast "may" sell back the shares to the Co-op for the same price
purchased. West Coast made no demand to the Co-op to buy back the shares,
and thus, the Co-op was under no obligation to do so.
The only issue presented on this record and briefing is whether it was
error for the trial court to award the Co-op dues it identified in its counterclaim.
On this issue, we conclude that the purchase of 20 shares was contingent on the
approval of the development plan proposed by West Coast—a contingency
No. 69255-1-1/8
rendered impossible by the failure of the parties to form a binding contract.
Because this contingency never occurred, the Co-op's right to collect dues
allegedly owing on the shares is nonexistent. The trial court thus erred as a
matter of law in determining that the Co-op was entitled to those sums.16
We cannot determine from this record what the dues would be for the one
share that West Coast owes. We presume that the Co-op will need to
recalculate dues owed by its shareholders and that the one share may thus be
greater than 1/21 of the dues owed.
In conclusion, we affirm the trial court's finding that no contract was
formed, but reverse its decision on the Co-op's counterclaim against West Coast
for unpaid dues and assessments owed on 20 of the 21 shares it purchased.
The matter is remanded for proceedings in accord with this opinion.
WE CONCUR:
16 West Coast seems to rely on its nonpayment of dues as its expression that it
wanted to sell back the shares to the Co-op. But as evidenced by Co-op board
minutes, West Coast had been late in paying its dues previously. Thus,
nonpayment of dues cannot be considered a demand for the Co-op to
repurchase those shares. Further, its argument does not address what
significance, if any, to give to the fact that unchallenged finding of fact 67 notes
that the plat was approved by the County.
8