Daily v. Warren
| Decision Date | 11 January 1977 |
| Docket Number | No. 1514--II,1514--II |
| Citation | 16 Wn.App. 726,558 P.2d 1374 |
| Parties | James N. DAILY, Respondent, v. Earle G. A. WARREN and Irene G. Warren, husband and wife, Appellants, Alex W. Jessiman and Grace A. Jessiman, husband and wife, Defendants. |
| Court | Washington Court of Appeals |
H. John Aitken, Pebbles, Swanson & Lindskog, Olympia, for appellants.
John B. Troup, Troup & Christnacht, Tacoma, for respondent.
Earle G. A. Warren and Irene G. Warren, his wife, appeal from a Thurston County Superior Court judgment which forfeited to James N. Daily, as seller, $25,000 deposited by Warrens as earnest money and part payment for the purchase of a tavern.
The issues presented on appeal are: (1) Did Mrs. Warren 'join' in the purchase transaction, as required by RCW 26.16.030(4), so as to render the marital community liable on the purchase contract which she did not sign? (2) Was a $24,000 promissory note intended to be earnest money and partial payment so as to be subject to forfeiture as liquidated damages? (3) Was the liquidated damages provision of the contract in reality one for a penalty and thus unenforceable? We resolve all issues against the Warrens and affirm the judgment of the trial court as modified.
The Warrens and Alex W. Jessiman were interested in purchasing a tavern as an investment. Commencing on July 1, 1972, they looked at approximately 25 to 30 such properties from Aberdeen to Seattle without finding one to suit them. In October 1972, through the auspices of the listing broker, Messrs. Warren and Jessiman became interested in the 2121 Tavern in Tacoma, Washington. After inspecting the books and records of the business and meeting on several occasions with its owner, James N. Daily, both men, on October 24, 1972, signed and presented through the broker an earnest money agreement for its purchase. The offer was for $215,000 for real property and inventory and was accompanied by $1,000 as earnest money in the form of a check drawn by Mr. Warren on the Warren marital community bank account. Daily refused the offer, insisting that the earnest money was insufficient. The parties met again to discuss the earnest money and down payment requirements only, there being no disagreement on price. At this meeting Daily insisted on $25,000 earnest money and partial payment, but agreed to accept $24,000 in the form of a note, payable within a few days, because Warren and Jessiman needed time to realize cash from the disposition of other properties.
On October 25, Warren and Jessiman signed and presented to Daily a new earnest money agreement which provided Inter alia 'received . . . $25,000.00, in the form of check for $1,000.00, cash for $_ _, Note for $24,000.00 due 11/10/72, paid or delivered . . . as earnest money in part payment of the purchase price . . .' The agreement further provided for payment of an additional $27,500 on or before January 15, 1973, and the balance in monthly installments. This second agreement, accompanied by the $1,000 check and a promissory note for $24,000 was accepted by Daily on October 27. Although both earnest money agreements described Warren and Jessiman as 'married men,' the agreements and the promissory note were not signed by their respective spouses, neither of whom personally participated in negotiations with Daily.
The three men agreed on November 1, 1972 as a closing or 'prorating' date for the purchase, which was contingent on state approval of liquor license transfers. Also, because all parties anticipated state approval by November 15, 1972, Warren and Jessiman actually commenced to work at the tavern on November 2, 1972, with the understanding they would receive all profits of the business after that date. On November 8, 1972, when Jessiman became ill and could not continue the tavern work, Warren called Daily to inform him they would not go through with the purchase. Daily brought suit on the promissory note against Warren and Jessiman and their marital communities, alleging it was earnest money and part payment which had been forfeited as liquidated damages. The trial court concluded that Mrs. Warren had 'joined' or 'participated' in the purchase of the tavern so as to bind the marital community, and that the promissory note was given as earnest money and part payment and was properly forfeited as liquidated damages. Warrens appeal from a judgment entered against them individually and as a marital community. 1 We agree with the trial court's conclusions.
This case hinges upon an interpretation of RCW 26.16.030(4), which provides:
Neither spouse shall purchase or contract to purchase community real property without the other spouse Joining in the transaction of purchase or in the execution of the contract to purchase.
(Emphasis added.) We have found only one Washington appellate decision interpreting this 1972 amendment to our community property laws. In Pixton v. Silva, 13 Wash.App. 205, 534 P.2d 135 (1975), a wife was held not to have joined or participated in a transaction for the purchase of a dairy farm. The facts negating a joinder were that she had not signed the earnest money agreement, she saw the property for the first time only after execution of the agreement by her husband, she did not discuss terms with the sellers, she expressed neither approval nor disapproval to the sellers, and the next day she insisted the contract be repudiated.
As noted in Pixton, it has been suggested that, even though the exceptions in this statutory provision should be strictly construed to shield the marital community from liability for acts of one spouse acting alone, decisions construing our prior community property law should be looked to in determining what evidence will support a finding of 'joinder.' Cross, Equality for Spouses in Washington Community Property Law--1972 Statutory Changes, 48 Wash.L.Rev. 527 (1973). Under the former statutes the husband acting alone as manager of the community property could bind the marital community to a Purchase of real property. Kupka v. Dickson, 72 Wash.2d 217, 432 P.2d 657 (1967); Baker v. Murrey, 78 Wash. 241, 138 P. 890 (1914). Such was not the case, however, when the husband attempted to Transfer or Encumber the community real property; former RCW 26.16.040 2 specifically required that the wife join in the execution of the actual instrument of conveyance and that it be acknowledged by her. Washington cases construing this provision broadly...
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