City of Everett v. Sumstad's Estate

• Decision Date: 14 July 1980
• Docket Number: No. 7327-3-I,7327-3-I
• Citation: 26 Wn.App. 742,614 P.2d 1294
• Parties: , 29 UCC Rep.Serv. 836 CITY OF EVERETT, a Municipal Corporation, Plaintiff, v. ESTATE of Oddmund SUMSTAD, Deceased, Respondent, Al Mitchell and Rosemary Mitchell, and marital community, Appellants.
• Court: Washington Court of Appeals

Page 742

26 Wn.App. 742

614 P.2d 1294, 29 UCC Rep.Serv. 836

CITY OF EVERETT, a Municipal Corporation, Plaintiff, v. ESTATE of Oddmund SUMSTAD, Deceased, Respondent Al Mitchell and Rosemary Mitchell, and marital community, Appellants.

No. 7327-3-I.

Court of Appeals of Washington, Division 1.

July 14, 1980.

Robert S. Bryan, Lanning & Bryan, Seattle, for appellants.

Wilfred E. Schlicker, Franklin & Watkins, Seattle, for respondent.

DORE, Judge.

The Mitchells appeal from a summary judgment establishing that the Estate of Oddmund Sumstad has the superior legal and equitable right in title to the sum of $32,207, found in a locked compartment of an auctioned safe.

ISSUES

ISSUE 1: Under the objective theory of contracts, did the parties at an auction reasonably manifest an intent to include the contents of a safe in its sale?

ISSUE 2: Are the Mitchells, the successful bidders at an auction, entitled to reasonable attorney's fees because they were required to defend the interpleader action?

FACTS

The facts are undisputed. The Mitchells, who operate a second-hand store, attended an auction and purchased a safe for $50. They subsequently delivered it to a locksmith who, upon opening a locked inner door, found $32,207. The locksmith contacted the Everett Police Department, which impounded the funds. Both the Mitchells and the estate made a claim to the funds, and thereafter the City of Everett commenced an interpleader action.

The Mitchells were regular customers at the auction and were familiar with a sign that appeared behind the auction block which read: "All Sales Are Final." In their affidavit, they stated that:

At the auction we saw, among other things, . . . two safes . . . Regarding the one we ultimately purchased, we saw that the top outer-most door with a combination lock was open, and that the inner door was locked shut. That inner door required a key to open, and we learned that the safe would have to be taken to a locksmith to get the inner door opened because no key was available. We also learned that the combination for the outer lock was unknown. The auctioneer told the bidders that both this and the other safe had come from an estate, that both were still locked, that neither had been opened, and that the required combinations and key were unavailable for either. They were both like a "pig-in-a-poke" because of the equal possibilities that: (1) The inner contents or condition would be detrimental to its value to us; (2) would increase its value to us; (3) it would be empty or its contents without significance. In any event, we did know that its ultimate value to us depended in part upon whether a locksmith could make it operable or could only damage it in opening the inner drawer. The cost of the locksmith's effort was also a factor. The purchase of this safe was a gamble on our part in these respects.

The auctioneer stated in his affidavit that he was contacted by the executor of the estate and agreed to auction off certain property for a 30 percent commission. He initially went to the decedent's residence and was shown certain property by three young girls. He observed three safes; however, because he was told the family wanted to keep one of the safes, he had to return with the executor, who showed him which items were to be removed, including two of the safes. At the auction he told the crowd that the safes were from an estate; that an inner door was locked and had never been opened; and that he did not have the combination.

The personal representative of the estate stated in an affidavit that he had hired the auctioneer as an agent to sell certain personal property belonging to the estate, but that he "only intended to sell the safe, not the contents." He further stated that he believed the safe, a "tube" type safe with access gained from the top, was empty.

Based upon these undisputed facts, the trial court determined that the contents of the safe $32,207 belonged to the estate.

DECISION

ISSUE 1:

The Mitchells contend that they are entitled to the contents of the safe under RCW 62A.2-403(2) because the estate, through its agent, entrusted the safe and its contents to the auctioneer, a merchant, who sold it to them as buyers in the ordinary course of business. We disagree.

The adoption of the Uniform Commercial Code did not alter common law principles requiring a "meeting of the minds" to validate a contract. Lakeside Pump & Equip., Inc. v. Austin Constr. Co., 89 Wash.2d 839, 576 P.2d 392 (1978). Although the auctioneer may have been a special agent for the estate, Restatement (Second) of Agency § 1, Comment e (1958), and had the authority to enter into a contract for his principal for the sale of the safe and its contents, the ultimate question is whether there was in fact a sale of the safe and its contents at the time of the auction. Resolution of this issue depends upon an analysis of the objective theory of contracts.

In Swanson v. Holmquist, 13 Wash.App. 939, 942, 539 P.2d 104 (1975), the court stated:

Mutual assent is the modern expression for the concept of "meeting of the minds." See Wetherbee v. Gary, 62 Wash.2d 123, 381 P.2d 237 (1963). In the absence of mutual assent there can be no contract. . . . Mutual assent cannot be based upon subjective intent, but rather must be founded upon "an objective manifestation of mutual intent on the essential terms of the promise."

(Citations omitted.) See Barnes v. Treece, 15 Wash.App. 437, 549 P.2d 1152 (1976); Wesco Realty, Inc. v. Drewry, 9 Wash.App. 734, 515 P.2d 513 (1973).

The objective theory lays stress on the outward manifestation of assent made to the other party in contrast to the older idea that a contract was a true "meeting of the minds."

J. Calamari & J. Perillo, The Law of Contracts § 2-2, at 24 (2d ed. 1977). "A party's intention will be held to be what a reasonable (person) in the position of the other party would conclude his (or her) manifestations to mean." J. Calamari & J. Perillo, supra at 24.

The issue as to whether the sale of an item also includes the sale of its contents is discussed in Annot., 4 A.L.R.2d 318, 319 (1949):

Since a sale is a consensual transaction, the subject matter which passes is to be determined by the intent of the parties, as revealed by the terms of their agreement in the light of the surrounding circumstances.

Thus, in determining whether an article secreted in the ostensible subject matter also passes by the sale the courts have looked to the terms of the contract and the situation of the parties. Where both buyer and seller were ignorant of the existence or presence of the concealed valuable, and the contract was not broad enough to indicate an intent to convey all the contents, known, or unknown, the courts have generally held that as between the owner and the purchaser, title to the hidden article did not pass by the sale.

(Footnote omitted.) In West Coast Airlines, Inc. v. Miner's Aircraft & Engine Serv., Inc., 66 Wash.2d 513, 403 P.2d 833 (1965), the court was asked to resolve a conflict in the ownership of two aircraft engines that had been stored in engine cans and sold to a junk dealer as scrap metal. In an action for replevin of the engines, the court stated at 518, 403 P.2d at 833 that:

A sale is a consensual transaction. The subject matter which passes is to be determined by the intent of the parties, as revealed by the terms of their agreement, in the light of the surrounding circumstances.

The court relied upon the cases cited in Annot., 4 A.L.R.2d 318 (1949), and stated:

Unknown contents of the subject matter of a sale that are not essential to its existence or usefulness, but which are merely deposited therein, and which are not within the contemplation of or intention of the contracting parties, do not pass by the sale.

(Italics ours.) West Coast Airlines, Inc. v. Miner's Aircraft & Engine Serv., Inc., supra, 66 Wash.2d at 519, 403 P.2d at 833. Although the court applied the "meeting of the minds" test, it is apparent that under the objective theory of contracts, there was no mutual assent as to the sale of the engines inside the sealed engine cans. In our view, West Coast Airlines is controlling authority.

The question becomes: Did the parties here reasonably and objectively manifest an intent to include the contents of the safe in its sale?

The undisputed evidence shows that the Mitchells were regular patrons of the auction. Prior to bidding, the auctioneer described the safe as coming from an estate and containing an inner door that was locked and required a key to open. Neither the auctioneer nor the purchasers expressly stated that any unknown contents were included in the sale of the safe. Although it may be argued that the auctioneer's statements concerning the condition of the safe implied that both the safe and its contents were for sale, a more reasonable conclusion is that he simply informed possible bidders as to the safe's true value, i. e., that it was not fully operable and would have to be taken to a locksmith. It does not reasonably appear that the auctioneer, as agent, objectively manifested an intent to sell the contents of the safe.

Similarly, the Mitchells could not reasonably have expected to purchase the contents of the safe simply because they were told that a particular door or compartment was locked or because subjectively they hoped to find something of value in the item purchased. A bidder who is an experienced purchaser at auctions, knowing that the safe was part of an estate sale, would have reasonably expected that it had been inventoried and any contents removed. The ultimate purchase price of $50 appears reasonable in light of the safe's condition, and there is no evidence that the auctioneer attempted to inflate the bidding by emphasizing the fact that the safe was partially locked. Nor was the money deposited in the locked door of the safe essential to its usefulness. The Mitchells' statement that they...