DO NOT CITE.
SEE RAP 10.4(h).
Court of Appeals
Division III
State of
Opinion Information
Sheet
Docket Number:
20793-5-III
Title of Case:
Aspen Grove, LLC, et al v. Aer-Ex, Inc., et al
File Date:
SOURCE OF
APPEAL
----------------
Appeal from
Docket No:
98-2-00446-3
Judgment or order under review
Date filed:
JUDGES
------
Authored by Dennis J. Sweeney
Concurring: Frank L Kurtz
Stephen M Brown
COUNSEL OF
RECORD
-----------------
Counsel for Appellant(s)
John Todd Henry
Oles Morrison Rinker & Baker
Craig Douglas Magnusson
Oles Morrison Rinker & Baker LLP
Counsel for Respondent/Cross-Appellant
John A. Jr Maxwell
Attorney at Law
IN THE COURT OF APPEALS OF THE STATE OF
ASPEN GROVE, L.L.C., a ) No. 20793-5-III
company, )
)
Appellant,
)
)
RICHARD H. and KAREN R. WADE, )
husband and wife, )
)
Plaintiffs,
)
)
v. )
Division Three
) Panel Eight
AER-EX, INC., a Washington )
corporation; CONTRACTORS )
BONDING & INSURANCE COMPANY, a )
and USF&G, a foreign insurer )
doing business in
)
Defendants,
)
)
STOUGARDS, INC., a Washington )
corporation, )
UNPUBLISHED OPINION
)
Respondent and )
Cross-Appellant.
SWEENEY,
J. -- Extrinsic evidence is admissible to prove the existence
of a contract and specifically whether a written
contract fully integrates
the parties' full agreement. Equitable Life Leasing Corp. v. Cedarbrook,
Inc., 52 Wn. App. 497, 505, 761 P.2d 77 (1988). The trial court found that
the parties to these two contracts--Richard Wade
doing business as
Grove, L.L.C. (Wade) and Mike Stougard doing
business as both Aer-Ex, Inc.
and Stougards, Inc. (Stougard)--had deducted
$225,000 from two
contemporaneously executed written contracts (one
for a construction
project and one for the sale of land) for the
purpose of avoiding taxes on
each transaction.
Wade refused to pay Stougard upon completion of the
construction work and the land sale fell
through. The court ordered Wade
to pay the full amount of the agreed price for the
construction work, even
though $225,000 of that price was not reflected in
the written agreement.
The court's finding that the written agreements did
not represent the full
agreement of these parties is amply supported by
this record. And that
finding supports the court's conclusion that Wade
breached the contract.
We therefore affirm the judgment of the trial court,
but remand for
assessment of attorney fees and prejudgment
interest.
FACTS
Richard and Karen Wade formed Aspen Grove, L.L.C.,
to construct and operate
a mobile home park.
Wade also owned several parcels of undeveloped
property.
Mike Stougard owned two companies:
a construction company
called Aer-Ex, Inc. and a land investment company
called Stougards, Inc.
Wade and Stougard negotiated a two-way
agreement. Aer-Ex would build the
roads and utilities at Aspen Grove. The parties agreed on a price of
$501,763 for the work. Stougards, Inc. also agreed to purchase a
17-acre
parcel of land from Wade. The parties agreed the value of that property
was $25,000 per acre or $425,000. Clerk's Papers (CP) at 79, 88, 92
(findings of fact 4, 5, 7; conclusion of law 12);
Report of Proceedings
(RP) (Vol. II) at 87, 123-25.
To accommodate Wade's desire to minimize sales and
excise taxes, the
parties did not write up a $501,763 construction
contract and a $425,000
real estate contract. Instead, the construction contract showed
$276,763
as the price of the job. This amount barely covered Stougard's hard
costs.
CP at 83 (Mem. Decision). They then executed a separate purchase and
sale
agreement showing the price of the land as
$200,000. On paper, then,
$225,000 disappeared from each side of the deal.
The purchase and sale agreement was conditioned on
completion of the
construction contract. Both documents were prepared by Wade's
attorney,
Steven Lathrop.
The construction contract contains no integration clause.
Stougard completed the construction project. Wade was disgruntled over the
progress of the construction and refused to
pay. For this and other
reasons, Stougard was unable to close the land
purchase.
Aspen Grove and Wade sued Aer-Ex, Stougards, Inc.,
and the bonding
companies alleging breach of contract for failing to
pay subcontractors and
suppliers and not completing the job on time. Aer-Ex counterclaimed and
alleged that Wade breached by not paying. Stougards also requested
specific performance on the real estate
contract. Aer-Ex alleged Wade and
Aspen Grove were unjustly enriched by receiving
benefits without paying for
them.
After a bench trial, the judge determined that Wade
still owed Aer-Ex, Inc.
$89,556.88 on the construction contract as
written. It entered a judgment
for $147,556.88 including prejudgment interest and
attorney fees and costs.
Wade paid this part of the judgment. The court found that Stougard's
inability to close the land deal was not caused
exclusively by Wade's
failure to honor the construction contract. The court, therefore, denied
Stougard's prayer for specific performance. Stougard did not appeal this
judgment.
The court then went on to conclude that neither of
these two contracts was
an integrated agreement. The court considered extrinsic evidence on
the
formation of the contract and the parties' intent
and found that the two
written agreements were part of a single, integrated
transaction. The
court found that the agreed construction transaction
was for $501,763, and
that Wade received that amount of construction
work. But the land deal, by
which Stougard would also be enriched by $225,000
over the stated price,
did not close.
The court therefore concluded that Wade was unjustly
enriched by $225,000.
The court then enforced the entire agreement. It concluded that Wade still
owed Stougard $225,000, the balance of the actual
agreed price for the
construction.
Wade appeals this ruling.
The final award was for $89,556.88 to Aer-Ex, Inc.
on the written
construction contract, and $225,000 to Stougards,
Inc. on the quasi
contract.
Aer-Ex, Inc. was named the judgment creditor of both awards. CP
at 94. The
court concluded that both awards were liquidated, in the sense
that they were readily determinable and that
prejudgment interest should,
therefore, be awarded. The order of judgment, however, awards
prejudgment
interest only for the $89,556.88, not for the
$225,000. Aer-Ex cross-
appeals this failure to award prejudgment interest
in the judgment.
DISCUSSION
Wade contends that any determination of the
agreement between the parties
must be found within the four corners of the two
written contracts. Wade
also contends the court erroneously (a) awarded an
equitable remedy on what
was a strictly legal claim, and (b) made an award to
Stougards, Inc., when
Stougards, Inc. was not a party to the construction
contract--Aer-Ex was.
And for the first time on appeal, Wade contends that
neither Mike Stougard
nor Stougards, Inc. is a licensed contractor and
they are therefore
statutorily barred from seeking recourse in the
courts.
Court's Findings of Fact
Wade
assigns error to findings of fact 7 (the parties actually agreed
to contract prices $225,000 more than was reflected
in the written
contracts) and 20 (Wade refused to pay and Stougard
presented a bill for
the full amount).
These findings summarize the court's determination of
the entire agreement and its finding that Wade
breached by not paying.
The court entered several conclusions of law to the
effect that the written
agreements here did not comprise the full and
integrated agreement of these
parties and that extrinsic evidence was therefore
admissible. Wade assigns
error to conclusion of law 3 which provides:
It was
necessary to consider extrinsic evidence because the Purchase
and Sale agreement has a condition precedent the
successful completion of
the construction contract and the numbers of the
construction contract
simply do not add up to provide sufficient
consideration for the job
required. The
$276,763 reflected in the construction contract barely
covered the materials and supplies, provides very
little for labor and
nothing for Aer-Ex's management or profit. Explanation of the
interrelationship between the two agreements is
therefore necessary and the
extrinsic evidence of the parties, Lathrop and the
exhibits fill in the
blanks and form the umbrella under which the
contracts are structured.
CP at 90-91.
Wade also assigns error to conclusion of law 12
which provides:
The
entire agreement between the parties Aspen Grove LLC, Wades, Aer-
Ex, Inc. and Stougards Inc. was an accommodation
whereby each party would
receive the benefit in some fashion of both the
construction contract and
the purchase and sale agreement; that the overall
agreement was to divide a
$501,763 package of construction work between the
construction contract and
sale of land at an agreed price of $25,000 per acre
or $425,000.
CP at 92.
But Wade does not assign error to conclusion of law
2 which provides:
Extrinsic
evidence was admissible as to the entire circumstances under
which the contract was made, as an aid in
ascertaining the intent of the
parties.
CP at 90.
Neither does Wade dispute conclusion of law 11 which
provides:
Neither
the construction contract nor the Purchase and Sale Agreement
regarding the Kittitas Highway property by
themselves were integrated
agreements standing separately.
CP at 92.
Wade
contends that no evidence supports the finding that the $501,763
amount was ever agreed upon. But this simply ignores the testimony of Mr.
Lathrop, the attorney who prepared the
agreements. He testified and
produced phone records and contemporaneous notes
documenting the agreement
between Wade and Stougard--precisely the agreement
the court found existed
here.
Our
consideration of challenged findings and conclusions is limited to
whether there is substantial evidence to support the
findings and whether
the findings support the conclusions of law. Willener v. Sweeting, 107
Wn.2d 388, 393, 730 P.2d 45 (1986).
'Unchallenged findings are verities on appeal.' Professionals 100 v.
Prestige Realty, Inc., 80 Wn. App. 833, 841, 911
P.2d 1358 (1996).
Here, the
court gave great credence to Mr. Lathrop, who described the
integrated agreement between the two parties in
great detail. RP (Vol. II)
at 87-92.
Wade does not explain why the testimony of Mr. Stougard and Mr.
Lathrop is not substantial evidence supporting the
findings of a single
unified agreement.
For us it does just that.
Wade
notes that the court looked outside the four corners of the
contracts, and that the $501,763 figure was never
committed to writing.
But Wade offers no argument or citation to authority
to support the implied
contention that the court erred in considering the
extrinsic evidence. And
for good reason:
the court properly considered extrinsic evidence.
The court
may consider extrinsic evidence to determine whether or not
a contract is fully integrated--whether, although a
final expression of
those terms which it contains, it is not a complete
expression of all terms
agreed upon.
Berg v. Hudesman, 115 Wn.2d 657, 662, 801 P.2d 222 (1990).
Extrinsic evidence is admissible to prove omitted
but not inconsistent
terms, or to determine the intent of the
parties. Id.
The court
found that the construction contract did not express all the
terms agreed upon by these parties. It then properly admitted the
extrinsic evidence to prove the omitted terms and
the parties' intent. CP
at 90 (conclusion of law 3). And its findings that the contracts do not
reflect the agreement of these parties is amply
supported by this record.
Unjust Enrichment Award
Wade first characterizes the $225,000 judgment as an
'equitable' remedy.
He then attacks the award of this 'equitable remedy'
on a claim made 'at
law.' Wade's
arguments ignore two fundamental facts:
(1) The court did
not look at either contract standing alone, but
ruled that the construction
contract and the purchase and sale agreement
constituted a single
integrated agreement. (2)
The court found that Wade breached the
agreement and that Stougard did not breach it.
All of Wade's arguments rest on the premise that the
court found that Wade
did not breach the construction contract. But Wade does not assign error
to the court's findings and conclusions that:
payment
on the construction contract was due upon substantial
completion,
Aer-Ex
substantially completed the job in a timely manner and
requested payment, and
Wade
refused to pay. CP at 90 (findings of
fact 16-18, 20); CP at 91
(conclusions of law 4-5); CP at 84 (Mem.
Decision). Or that:
Stougard
did not breach the contract. CP at 91
(conclusions of law 7-
8); CP at 84 (Mem. Decision).
But
again, the overarching question here is whether the record
contains substantial evidence for the court's
finding that the parties
intended to integrate a single agreement in the form
of two separate
transactions.
And if so, does the record support the court's findings
that, under the entire agreement, Stougard performed
and Wade refused to
pay.
And the
court's findings add up to a conclusion that Wade breached the
contract.
Wade's arguments on appeal assume nonetheless that Stougard
breached and Wade did not. Those arguments are unfounded. Giving effect
to the court's findings of fact, conclusions of law,
and memorandum
decision in their entirety, the conclusion is
unavoidable that the court
found, based on substantial evidence, (1) that Wade
breached the
construction contract by refusing to pay upon timely
substantial
completion, and (2) that Stougard did not breach.
The court did not find that Wade owed Stougard under
the construction
contract alone.
The court did not reform the construction contract. The
court found that Wade owed Stougard under the single
integrated agreement.
The court also found that Wade's refusal to pay
Stougard upon substantial
completion of the construction was a significant
contributing factor in
Stougard's inability to exercise his right to obtain
a $425,000 parcel for
$200,000. The
remedy of unjust enrichment was then appropriate.
There is a laundry list of other assignments of
error by Wade, none of
which addresses the dispositive central factual
findings and legal
conclusions upon which the court's ultimate decision
is predicated. They
include:
1. Reformed
contract. Wade complains that the court
effectively reformed
the construction contract. The findings, conclusions, and memorandum
decision all show that the court did not reform the
construction contract.
What the court did was to consider extrinsic
evidence about the contract's
formation and rule (we conclude appropriately) that
the written contracts
were not integrated but part of a broader agreement.
2. Failure of
consideration. Wade complains that the
court rescinded the
construction contract as an equitable remedy for
failure of consideration.
Again, and for the same reasons we have discussed,
it did not. It was
simply part of a bigger deal.
3. Quantum
meruit. While the briefs discuss quantum
meruit and unjust
enrichment extensively, neither one of these
equitable remedies is
ultimately at issue.
The court found a contract and enforced that
contract.
The record does support the court's findings. Those findings support its
conclusions.
And the conclusions support the judgment in favor of
Stougard.
Stougard's Standing to Seek Relief
For the first time on appeal, Wade challenges
Stougard's right to seek
judicial enforcement of the construction contract
because Stougard is not a
licensed contractor.
RCW 18.27.080. Or, more
particularly, Wade
challenges Stougards, Inc.'s being named as a
judgment beneficiary when (a)
Stougards, Inc. is not a licensed contractor, and
(b) Stougards, Inc. did
not do the work.
We are interpreting a provision of the contractor
registration act, chapter
18.27 RCW.
Review is therefore de novo.
Cutler v. Phillips Petroleum Co.,
124 Wn.2d 749, 755, 881 P.2d 216 (1994).
The purpose of the contractor registration act is to
protect a defenseless
public from victimization by unreliable, fraudulent,
financially
irresponsible, and incompetent contractors. RCW 18.27.140; Williamson,
Inc. v. Calibre Homes, Inc., 147 Wn.2d 394, 400, 54
P.3d 1186 (2002). An
unregistered contractor may not seek redress from
the courts if a 'person
benefiting from the fruits of his unlicensed labor
refuses to pay.' Bort
v. Parker, 110 Wn. App. 561, 571, 42 P.3d 980,
review denied, 147 Wn.2d
1013 (2002).
Noncompliance with chapter 18.27 RCW is an affirmative
defense. As
such, it must be raised at trial.
Davidson v. Hensen, 135
Wn.2d 112, 123, 130-31, 954 P.2d 1327 (1998). It will not be addressed for
the first time on appeal. Puget Sound Marina, Inc. v. Jorgensen, 3 Wn.
App. 476, 480, 475 P.2d 919 (1970).
Moreover,
Wade does not contend that Aer-Ex, Inc. was not registered
or that Wade was victimized by any contractor's
unregistered status.
Neither does Wade contend that the purpose of the
act was violated by the
court's recognizing the benefit owed to Stougards,
Inc. in this judgment.
The contractor, Aer-Ex, was registered and was both
plaintiff and judgment
beneficiary.
Wade challenges the court's rationale for the judgment, not
the court's making Aer-Ex the beneficiary of a
judgment arising from Wade's
unjust enrichment at the expense of Stougards, Inc.
Moreover,
Stougard, as a party acting in association with a
responsible licensed contractor, satisfies RCW
18.27.080 for the purposes
of maintaining an action. N.W. Cascade Constr., Inc. v. Custom
Component
Structures, Inc., 83 Wn.2d 453, 519 P.2d 1 (1974).
It is
clear from conclusion of law 16 and the judgment order that the
judge did not differentiate between Aer-Ex and
Stougards, Inc. in
fashioning the remedy and rendering judgment. The court talks about 'the
amounts claimed by Aer-Ex, Inc. and awarded by the
court on the
construction contract and for unjust
enrichment.' CP at 92 (conclusion of
law 16). It
was not the court's intent to enter judgment for Aer-Ex on the
express contract and for Stougards, Inc. on the
quasi-contract. Rather,
the court entered judgment in favor of Mr. Stougard
and against the Wades,
based in part on the written agreement and in part
on the overall
integrated contract incorporating both written
agreements. The judgment
order names Aer-Ex, Inc. as the judgment creditor
for both parts of the
judgment.
Cross Appeal - Prejudgment Interest
Stougard contends that the court should have awarded
prejudgment interest
on the $225,000 judgment on the underlying contract
here ($501,763 less the
construction contract amount of $276,763). We agree.
If a
breaching party fails to pay a definite sum in money or to
render a performance with fixed or ascertainable
monetary value, interest
is payable from the time for performance. Restatement (Second) of
Contracts sec. 354, at 150 (1981).
Here, that part of the judgment denying prejudgment
interest on the
$225,000 is incompatible with the findings and
conclusions. In conclusion
of law 16, the court states that Aer-Ex is entitled
to prejudgment interest
on both the construction contract award and the
unjust enrichment award.
The court determined that the judgment was liquidated
and could be exactly
calculated.
The judgment awards prejudgment interest only on the
$89,556.88 contract award but not on the $225,000.00
due on the integrated
contract. CP
at 94.
The figure of $225,000 was cited throughout the
trial as the amount by
which the parties reduced both written agreements on
the understanding that
each party would have the benefit of both
agreements. The court did not
rely on discretion or opinion in determining this
amount. Based on the
court's conclusion of law that both parts of the
judgment were liquidated,
the judgment is in error.
We therefore remand for entry of an amended judgment
with prejudgment
interest on the $225,000 unjust enrichment award
from
accordance with conclusion of law 16.
Attorney Fees
Wade disagrees with the court's award of fees to
Aer-Ex. Wade argues that,
under RCW 4.84.330, it was entitled to fees,
instead. Because fees are
awarded to the prevailing party when authorized by
the agreement and the
purchase and sale agreement authorizes fees, Wade
contends it is entitled
to fees because it prevailed on the dispute over the
purchase and sale
agreement inasmuch as the court denied Stougard's
request for specific
performance.
But based on its decision that one overall agreement governs,
the trial court correctly awarded fees to Stougard
as the prevailing party.
Stougard is entitled to fees under the purchase and
sale agreement as the
prevailing party on appeal for the reasons set forth
by Aspen Grove. RAP
18.1.
CONCLUSION
We affirm
the judgment of the trial court but remand for amendment of
the judgment to reflect the court's conclusions of
law as to prejudgment
interest. And
we award Stougard attorney fees and costs.
A
majority of the panel has determined that this opinion will not be
printed in the
record pursuant to RCW 2.06.040.
Sweeney, J.
WE CONCUR:
Brown, C.J.
Kurtz, J.