Corinthian Corp. v. White & Bollard, Inc.

• Decision Date: 24 June 1968
• Docket Number: No. 38968,38968
• Citation: 74 Wn.2d 50,442 P.2d 950
• Court: Washington Supreme Court
• Parties: CORINTHIAN CORPORATION, a Washington Corporation, Respondent, v. WHITE & BOLLARD, INC., a Washington Corporation, Commerce Mortgage Company, Inc., a Washington Corporation, Corley Mortgage Company, Inc., a Washington Corporation, Appellants.

Page 50

74 Wn.2d 50

442 P.2d 950

CORINTHIAN CORPORATION, a Washington Corporation, Respondent, v. WHITE & BOLLARD, INC., a Washington Corporation, Commerce Mortgage Company, Inc., a Washington Corporation Corley Mortgage Company, Inc., a Washington Corporation, Appellants.

No. 38968.

Supreme Court of Washington, En Banc.

June 24, 1968.

Preston, Thorgrimson, Horowitz, Starin & Ellis, Edward Starin and Horowitz, Chas. Holman, Marion, Perkins, Coie & Stone, Burroughs B. Anderson and Richard R. Albrecht, Seattle, for appellants.

Rauscher, O'Connor & Kiefer, Edward A. Rauscher, Seattle, for respondent.

WEAVER, Judge.

This action stemming from a transaction in 1957 involves three Washington corporations: (1) Corinthian Corporation (plaintiff-respondent); (2) White &amp Bollard, Inc., (defendant-appellant); ¹ and (3) Corley Mortgage Co., Inc., (defendant-appellant and cross-appellant). We refer to the parties as Corinthian, W & B, and Corley.

This complex ² controversy orbits around the nature, interpretation, application, and alleged breach of a written agreement, entitled 'Option Agreement,' dated June 19, 1957, entered into by Corinthian and W & B.

Nature of the Case

In general, this is an action by Corinthian against W & B and Corley for damages for the alleged breach of the written agreement dated June 19, 1957. In addition, certain additional relief, which will be identified later in this opinion, is sought.

Of the 87 assignments of error, approximately 40 are directed to findings of fact or to requested findings of fact; almost 40 are directed to conclusions of law or to requested conclusions of law. Obviously, it is impractical to consider them seriatim or even in various categories, for they cover almost every facet of a complicated transaction and an accounting extending over an 8-year period.

After a review of the extensive record, we find that it supports the facts as we set them forth.

Facts

In 1957, Corinthian was the owner ³ of the right to acquire approximately 570 acres of land located in King County, east of Lake Washington, between the cities of Bellevue and Renton. The area is now known as Newport Hills. The land was unimproved, undeveloped, and unplatted.

The ultimate objective of the transaction between Corinthian and W & B was to develop this land into a residential area with ancillary facilities. Corinthian owned the land; W & B had the capacity to effect the development. It had the 'know-how'; an engineering department, a sales organization, an established relationship with home builders, the construction-financing facilities, and a residential mortgage department.

Agreement of June 19, 1957

June 19, 1957, Corinthian and W & B entered into an 8-page agreement entitled 'Option Agreement.' We believe it is significant that the words 'option,' 'optionor,' and 'optionee' are used in the instrument more than 100 times. The words 'buyer,' 'seller,' 'vendor,' or 'vendee' are not used.

An option to purchase property is a contract wherein the owner, in return for a valuable consideration, agrees with another person that the latter shall have the Privilege of buying the property Within a specified time upon the terms and conditions expressed in the option. McFerran v. Heroux, 44 Wash.2d 631, 638, 269 P.2d 815 (1954), and authorities cited.

Since the written agreement of June 19, 1957, is the nucleus of this controversy, we find it necessary to set forth its salient provisions, numbered as they appear in the agreement.

The 'whereas' clause is this:

Optionee (W & B) has requested Optionor to grant an option to purchase certain real property of Optionor (Corinthian), and Optionor is willing to grant such option on the terms hereinafter provided * * *.

The 'granting' clause is this:

(1) Optionor grants to Optionee the option to purchase as hereafter set forth certain real estate in King County, Washington, described as follows: (Parcel A and Parcel B).

(2) For the sake of brevity we paraphrase the recited consideration. During the existence of the agreement, W & B agreed to pay all of the real estate taxes on Parcels 'A' and 'B', although it would own only that part of the property upon which it had exercised its option and had received a deed; and to pay the interest accruing upon Corinthian's contractual rights in its acquisition of all of the land (see note 3, supra). Paragraph 5 of the option agreement acknowledges that the taxes and interest to be paid were the consideration for the option. W & B was to advance the amount of any real estate sales tax which may apply to any purchase under the agreement, the tax to be repaid by Corinthian by crediting W & B with the amount thereof at the time the purchase price becomes due from W & B.

(3) W & B was granted the option to purchase the land in 40-acre parcels; in Parcel 'A' the 40 acres had to be a governmental subdivision. After designation of the first 40-acre parcel, subsequent options had to be of a 40-acre tract adjoining a tract previously conveyed to W & B.

(4) Execution of the agreement constituted the exercise by W & B of its option to purchase the first 40-acre parcel, and Corinthian was bound to deed it to W & B.

(5) The purchase price per acre for the total land purchased By exercise of options hereunder up to termination of this agreement shall be $2,000.00 per acre, increased by 50% Of the net profit realized by Optionee (W & B) with respect to property purchased and resold hereunder to the extent hereafter provided. (Italics ours.)

The method of payment may be 'old-hat' to an expert in real estate transactions or to an expert accountant; but, as set forth in the option agreement, it is a 'wonderful and fearful thing' for an appellate court called upon to consider the record.

The contractual plan of payment by W & B to Corinthian was completely deferred. W & B was to pay $1,200 per acre for the first 40 acres, payable on or before July 1, 1958: $1,400 on the second 40 acres upon which it exercised its option; $1,600 per acre for the third 40 acres; $1,800 for the fourth 40 acres; $2,199.50 per acre for each additional parcel upon which it exercised its option. W & B did not have to pay the basic purchase price of each 40-acre parcel, other than the first, until March 5 following the exercise of the option.

Thus, it would seem that Corinthian would not receive its basic sales price of $2,000 per acre until W & B had optioned and had paid for the last parcel in the tract. This, however, is subject to adjustment should the agreement be cancelled by either Corinthian or W & B.

In addition, however, Corinthian was to be entitled to 50% Of the net profit realized by W & B upon its resale of lots in each parcel. It is not necessary that we set forth the method of determining W & B's net profit. The first accounting of 'net profit' was to be made after W & B's purchase and resale of 200 acres; the second accounting after purchase and sale of the second 200 acres; and a final accounting after a purchase and resale of the remainder. This, however, is subject to adjustment should the agreement be cancelled by either Corinthian or W & B.

(6) W & B could not exercise an option until it had paid Corinthian the basic price of the land involved in previous options it had exercised.

(7) Upon receipt of written notice designating the parcel of land, Corinthian must forthwith deliver a deed to W & B.

(8) This is one of the paragraphs upon which the trial court placed great emphasis in support of its conclusion. We quote the pertinent portions.

Optionee (W & B) agrees to exercise at least one option during each calendar year of the existence of this agreement, commencing with 1957. Optionee agrees to exercise options covering all of parcels 'A' and 'B' above within seven and one-half years from the date of this agreement. * * * In the event any option is not exercised by Optionee by the date required hereunder, Optionor (Corinthian) shall have the right to cancel this agreement, provided, however, that Optionee, (W & B) on written notification to Optionor, shall have the right to extend the time for exercise of one option for a period of six months. * * *

(9) Optionee (W & B) agrees to pay before delinquency all assessments levied or becoming due against the property described in paragraph 1, provided, however, that if this agreement is terminated, Optionor (Corinthian) shall thereupon reimburse Optionee (W & B) for the amount of assessments previously paid by Optionee (W & B) which are allocable to property not purchased by Optionee.

(10) This paragraph of the agreement has no application to the instant case.

(11) Optionee (W & B) agrees to diligently pursue the development and resale of property purchased under this agreement and Optionee further agrees Not to undertake any other major development until 75% Completion of the development contemplated by Optionee (W & B) with respect to the property subject to this agreement. (Italics ours.)

Paragraphs 12, 13, 14, 15 and 16 have no bearing upon this litigation.

(17) Time is of the essence of this agreement. If Optionee shall fail to exercise any option or make any payment promptly at the time the same shall become due, or promptly perform any covenant, agreement or obligation hereunder, Optionor may elect to cancel this agreement by notice in writing and thereupon all rights of Optionee hereunder shall cease and any payments theretofore made shall be retained by Optionor as liquidated damages, provided, however, that Optionee shall not be relieved of paying $2,000.00 per acre due or to become due with respect to land previously purchased, including 50% Of the net profit realized therefrom, nor shall Optionee be relieved of the obligation to pay interest accrued to the date of cancellation and real estate taxes due on a pro rata basis at the date of cancellation. * * * In the event of any default, Optionor may bring an action for recovery of any amounts due from Optionee....