Home Realty Lynnwood, Inc. v. Walsh

• Decision Date: 04 August 2008
• Docket Number: No. 60821-5-I.,60821-5-I.
• Citation: 189 P.3d 253,146 Wn. App. 231
• Court: Washington Court of Appeals
• Parties: HOME REALTY LYNNWOOD, INC., d/b/a John L. Scott, Plaintiff Interpleader, v. John R. WALSH, Jr. and Marcy W. Walsh, Respondents, and Jae Won Lee and Mi Ja Lee, Appellants.

189 P.3d 253

146 Wn. App. 231

HOME REALTY LYNNWOOD, INC., d/b/a John L. Scott, Plaintiff Interpleader, v. John R. WALSH, Jr. and Marcy W. Walsh, Respondents, and Jae Won Lee and Mi Ja Lee, Appellants.

No. 60821-5-I.

Court of Appeals of Washington, Division 1.

August 4, 2008.

Randy Barnard, O'Shea Barnard Martin PS, Bellevue, WA, for Appellants.

David Carr Kelly, Peterson Russell Kelly PLLC, Bellevue, WA, Courtney Arin Williams, Attorney at Law, Seattle, WA, for Respondents.

LAU, J.

¶ 1 The real estate statute of frauds, RCW 64.04.010, requires that a contract for the sale of land must describe the land by legal description sufficient to locate the land without recourse to oral testimony. In this earnest money deposit dispute between buyers Jae Won and Mi Ja Lee and sellers John and Marcy Walsh, the trial court found that the residential purchase and sale agreement satisfied this requirement based entirely on oral testimony that the parties intended to attach the legal description by faxing and placing the documents together in the same file folder. Because we adhere to Washington's strict rule against recourse to oral testimony in determining whether a legal description satisfies the statute of frauds, we reverse the trial court's order granting the Walshes' summary judgment motion. We also remand to address the Walshes' restitution and attorney fee claims.

FACTS

¶ 2 In spring 2006, the Lees offered to purchase the Walshes' home in Bellevue. The Lees and the Walshes were represented by real estate agents from different offices of John L. Scott Realty. The parties negotiated a purchase price of $1,550,000 and entered into a residential purchase and sale agreement on March 31, 2006. They added language to the agreement stating that the standard financing contingency "shall be deemed waived 20 days after mutual acceptance unless selling agent gives listing agent a letter from the lender stating why buyers loan was not approved." The Lees tendered a $50,000 personal check to John L. Scott on April 4, 2006, to be held in escrow as the earnest money deposit. The agreement also contained a forfeiture clause entitling the Walshes to retain the deposit if the Lees wrongfully failed to close.

¶ 3 It is undisputed that the purchase and sale agreement did not include a legal description of the real property. But the agreement did contain boilerplate language authorizing "Selling Licensee, Listing Agent or Closing Agent to insert, attach or correct the Legal Description of the Property." (Emphasis added.) Ki Kim, the Lees' real estate agent, testified that the Walshes' agent, Carrie Lord, delivered by courier a preliminary commitment for title insurance to his office on or before March 31, 2006. Kim explained that the preliminary commitment for title insurance included a copy of the statutory warranty deed containing the legal description. He also testified that he faxed the purchase and sale agreement and the statutory warranty deed back to Lord as part of the counteroffer.¹ Kim described that all of the documents related to the transaction, including the statutory warranty deed, were contained in a "kind of big book" or "whole packet of stuff." Clerk's Papers (CP) at 148.

¶ 4 Kim's employer and the owner of John L. Scott Lynnwood West, James Fultz, testified that a copy of the seller's statutory warranty deed containing the legal description was placed in the same file folder as the purchase and sale agreement. Fultz said that this was his "normal procedure," that "[w]e consider that the manila folder attaches it," and that "[i]f it's in the file, it's attached." Fultz admitted that he did not consider all of the documents contained in that file to be "attached" to the purchase and sale agreement. Fultz also testified that there was no doubt in his mind as to the identity of the real property subject to the purchase and sale agreement.

¶ 5 The transaction failed to close. The financing contingency deadline passed on April 20, 2006, and the Lees did not provide a letter from their lender as required by the purchase and sale agreement. Four days later, the Lees executed a rescission of the purchase and sale agreement directing that their earnest money deposit be returned. The Walshes refused to sign it.

¶ 6 On June 21, 2006, Home Realty Lynnwood, Inc. (d/b/a John L. Scott Lynnwood West) filed an interpleader complaint under CR 22 and deposited the $50,000 earnest money with King County Superior Court. The Walshes filed an interpleader answer and counterclaim requesting an award of earnest money and attorney fees.

¶ 7 On October 12, 2007, the trial court granted the Walshes' motion for summary judgment.² The court acknowledged that no legal description was stapled to the purchase and sale agreement. The court noted Kim's undisputed testimony that the statutory warranty deed containing the legal description was "part of the `whole package'" and that it was contained in a "`kind of big book'" with the purchase and sale agreement.³ The court also noted Fultz's undisputed testimony that the legal description was in the file with the purchase and sale agreement and that Fultz considered it to be "attached." Relying on this evidence, the court reasoned that the statute of frauds was satisfied because

[t]here is no argument that there was any confusion which piece of property was being sold here. Thus, the motion turns on whether the parties intended the word "attached" to mean physically stapled, or included in the file and "big book" of documents. If the Lees intended to show the former, they could have presented evidence establishing the same, but the uncontroverted evidence shows that the parties intended the latter.

The Lees appealed.

ANALYSIS

¶ 8 The Lees did not move for summary judgment below. Rather, in response to the Walshes' motion for summary judgment, they requested that the court enter summary judgment in their favor. Summary judgment may be granted to the nonmoving party "if it becomes clear that he or she is entitled thereto" and the original moving party has had an adequate opportunity to present materials and argument in rebuttal. 14A KARL B. TEGLAND, WASHINGTON PRACTICE: CIVIL PROCEDURE § 25.13, at 100 (2003). This court reviews summary judgment orders de novo and engages in the same inquiry as the trial court. Jones v. Allstate Ins. Co., 146 Wash.2d 291, 300, 45 P.3d 1068 (2002). Summary judgment will be affirmed if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. CR 56(c); Huff v. Budbill, 141 Wash.2d 1, 7, 1 P.3d 1138 (2000).

Statute of Frauds

¶ 9 The Lees argue that the trial court erred by relying on oral testimony to establish whether the legal description was "attached," as expressly permitted under the purchase and sale agreement. Therefore, the purchase and sale agreement is void and unenforceable in violation of the statute of frauds. The Walshes contend that the deposition testimony of Kim and Fultz established that the two documents were intentionally "attached" by (1) faxing a copy of the statutory warranty deed along with the counteroffer and (2) placing the two documents in the same file folder.

¶ 10 The statute of frauds for real property provides, "Every conveyance of real estate, or any interest therein, and every contract creating or evidencing any encumbrance upon real estate, shall be by deed. . . ." RCW 64.04.010. The long-established rule in Washington is that to comply with the statute of frauds, the writing must contain a legal description of the property by lot and block number, addition, city, county, and state. Martin v. Seigel, 35 Wash.2d 223, 229, 212 P.2d 107 (1949). The instrument must contain a description sufficient to locate the land without recourse to oral testimony or contain a reference to another instrument which does contain a sufficient description. Ecolite Mfg. Co. v. R.A. Hanson Co., 43 Wash.App. 267, 270, 716 P.2d 937 (1986). The legal description need not be written in the real estate contract at the time of signing, provided that it expressly authorizes an agent to later fill in the legal description and the agent does so. Noah v. Montford, 77 Wash.2d 459, 463 P.2d 129 (1969); Edwards v. Meader, 34 Wash.2d 921, 210 P.2d 1019 (1949); Nishikawa v. United States Eagle High LLC, 138 Wash.App. 841, 848 n. 2, 158 P.3d 1265 (2007).

¶ 11 Washington's rule is "the strictest in the nation. . . . In most states an incomplete description or a street address is sufficient, and parol evidence may be received to locate the land. Not so in Washington." 18 WILLIAM B. STOEBUCK & JOHN W. WEAVER, WASHINGTON PRACTICE: REAL ESTATE: TRANSACTIONS § 16.3, at 225 (2d ed. 2004).

We do not apologize for the rule. We feel that it is fair and just to require people dealing with real estate to properly and adequately describe it, so that courts may not be compelled to resort to extrinsic evidence in order to find out what was in the minds of the contracting parties.

Martin, 35 Wash.2d at 228, 212 P.2d 107.⁴

¶ 12 Whether one may "attach" a legal description to a purchase and sale agreement by faxing the two documents together or placing them in the same file folder, thereby satisfying the statute of frauds, is an issue of first impression in Washington. But we need not address this question because the only evidence in our record connecting the purchase and sale agreement with the statutory warranty deed containing the legal description was the deposition testimony of Kim and Fultz.⁵ The purchase and sale agreement itself did not contain a legal description or any other reference connecting it to the statutory warranty deed containing the legal description. The "kind of big book" described by Kim and the file folder described by Fultz are not part of our record.⁶ Nor does the record contain a fax coversheet or other evidence of physical attachment.

¶ 13 The Walshes argue that separate documents may be "atta...