Hunt v. Ellsworth, No. 24129-7-III (WA 3/30/2006)
| Decision Date | 30 March 2006 |
| Docket Number | No. 24129-7-III.,24129-7-III. |
| Court | Washington Supreme Court |
| Parties | DEBRA M. HUNT, Respondent, v. DEBORAH D. ELLSWORTH, dba DEBORAH KLASSEN, Appellant. |
Appeal from Superior Court of Spokane County. Docket No: 03-2-03728-6. Judgment or order under review. Date filed: 04/26/2005. Judge signing: Hon. Tari S Eitzen.
Counsel for Appellant(s), Steven A. Crumb, Attorney at Law, 1950 Bank of America Financial Ctr, 601 W Riverside Ave, Spokane, WA 99201-0621.
Counsel for Respondent(s), Steven W. Hughes, Attorney at Law, 900 N Maple St Ste 300, Spokane, WA 99201-1807.
Debra Hunt wanted to sell her pet grooming business. Deborah Ellsworth also known as Deborah Klassen (Ms. Klassen) wanted to purchase the business with funds obtained from her dissolution settlement. The parties discussed a sales price of $60,000, and Ms. Klassen took over the business and made a $3,000 down payment. When Ms. Klassen failed to make any other payments, Ms. Hunt removed some equipment from the shop. Ms. Hunt then sued Ms. Klassen for breach of contract, conversion, fraud, and intentional infliction of emotional distress. Ms. Klassen counterclaimed. After a bench trial, the court concluded that a valid enforceable contract existed for the sale and purchase of the business and that Ms. Klassen breached this contract by failing to pay the purchase price. The court awarded Ms. Hunt $57,000, plus prejudgment interest and attorney fees. Ms. Klassen appeals. We affirm, and award attorney fees to Ms. Hunt on appeal.
In August 1993, Debra Hunt opened a pet grooming business known as `Auntie Deb's Pet Salon' in Spokane, Washington. Ms. Hunt met Ms. Klassen in 1997, when Ms. Klassen began bringing her dog to Ms. Hunt's shop. In 1998, Ms. Klassen began taking her daughter to the shop a few times a week so that she could see the animals.
In January 2003, Ms. Hunt attempted to sell her pet grooming business for $75,000. Negotiations ended when Ms. Hunt agreed to lower the price to $60,000, but the potential buyer insisted on $30,000. Upon learning of these negotiations, Ms. Klassen expressed an interest in buying the business as a means to support herself after her dissolution became final. Also, Ms. Klassen hoped to pay for the business with funds from the dissolution settlement.
During the first week in February 2003, Ms. Klassen began volunteering at the shop to observe and evaluate the business. Ms. Klassen was aware of the volume of the business and observed the loyalty of Ms. Hunt's customers. Ms. Klassen had access to the till, yellow slips, all business records, and the business's computer. On March 8, the parties met and agreed on a purchase price of $60,000. They also agreed that Ms. Hunt would no longer work at the shop and that Ms. Klassen would employ Kelly Sullens, a dog groomer who had previously been fired by Ms. Hunt. The plan was that Ms. Sullens, not Ms. Hunt, would teach Ms. Klassen how to groom pets.
Ms. Klassen testified that she became the owner of the business formerly known as `Auntie Deb's Pet Salon' on March 12. To this end, Ms. Klassen obtained her own business license, changed the name of the business, changed the business utilities to her name, opened a business checking account, told others she had purchased a business, and hired and fired employees. Ms. Hunt provided to Ms. Klassen, for her signature, a bill of sale with the stated purchase price of $60,000. Ms. Klassen said that she had to give the bill of sale to her attorney, but she did not sign or return it.
When Ms. Klassen agreed to the purchase price of $60,000, she indicated that she would get this money from her dissolution settlement. Ms. Klassen believed that she would be receiving her dissolution settlement between March 14 and March 17. According to Ms. Hunt, when the settlement did not materialize immediately, Ms. Klassen agreed that she would make payments of $500 per month until her dissolution was finalized, with any balance paid no later than September 12.
On March 24, Ms. Klassen gave Ms. Hunt a check in the amount of $2,000. Ms. Klassen noted on the check that it was a `Down payment.' Plaintiff's Ex. 5. When Ms. Hunt returned to the shop later that day, Ms. Klassen gave her a check for $500 and again made the notation `Down payment' on the check. Plaintiff's Ex. 6. But at trial Ms. Klassen testified that the purpose of these checks was to give money to Ms. Hunt so that she could put her life together and get her bed and breakfast operating.
Ms. Hunt gave Ms. Klassen two promissory notes memorializing the sale and purchase of the business for $60,000. The notes acknowledged the receipt of $2,500 from Ms. Klassen and required her to make weekly payments of $500 beginning on March 31, 2003, with the balance due on September 12 2003. Ms. Klassen gave these promissory notes to her attorney for review, but Ms. Klassen failed to sign or return either promissory note to Ms. Hunt. Nevertheless, on March 31, Ms. Klassen made a payment of $500 marked `Down payment.' Plaintiff's Ex. 6.
On April 1, Ms. Klassen signed a lease for the pet grooming business for a period of three years. Ms. Klassen agreed to exclude Ms. Hunt from the business and to post a sign stating that Ms. Hunt was a `persona non grata.' Plaintiff's Ex. 8. Ms. Klassen also changed the locks to the shop even though Ms. Hunt's personal property and tools were inside. Later, Ms. Hunt's personal property was removed from the shop. On April 5, Ms. Hunt went to the shop and removed a few 10-year-old pieces of equipment worth approximately $1,000. She left behind approximately $1,000 worth of her tools that were locked in a storage unit. Ms. Hunt then wrote a letter to Ms. Klassen offering to return the items and demanding payment on the contract.
Ms. Klassen's profit and loss statement for the business for the period of March 14, 2003 through June 30, 2004, showed gross income of over $170,000. Ms. Klassen's dissolution was finalized in July 2003, and she received in excess of $400,000 in cash, plus other property. Ms. Klassen made no other payments for the business. Ms. Klassen also never gave Ms. Hunt a notice to rescind the contract, nor did she offer to give the business back. Ms. Klassen has never requested any further business records from Ms. Hunt. At trial in February 2005, Ms. Klassen acknowledged that she had operated the business since March 12, 2003, but stated she had not purchased the business because, `We were in negotiations of purchasing.' Report of Proceedings (RP) at 257.
Ms. Hunt filed an action against Ms. Klassen alleging breach of contract, conversion, fraud, and emotional distress. Ms. Klassen counterclaimed alleging breach of contract and fraud. At the conclusion of a bench trial, a judgment was entered against Ms. Klassen for breach of contract. The court concluded that a valid enforceable contract existed between Ms. Klassen and Ms. Hunt and that Ms. Klassen breached this contract by failing to pay the purchase price. The court awarded Ms. Hunt $57,000, plus prejudgment interest and attorney fees under RCW 4.84.185. Ms. Klassen's motion for a new trial was denied. She appeals.
When reviewing a trial court's findings of fact and conclusions of law, findings of fact are reviewed to determine if they are supported by substantial evidence in the record. If such a showing is made, the court must decide whether those findings support the trial court's conclusions of law. Landmark Dev., Inc. v. City of Roy, 138 Wn.2d 561, 573, 980 P.2d 1234 (1999). Issues of law are reviewed de novo. Ackley-Bell v. Seattle Sch. Dist. No.1, 87 Wn. App. 158, 165, 940 P.2d 685 (1997).
The formation of a valid and legally enforceable contract requires (1) a proper and unrevoked offer, (2) acceptance, (3) competent parties, (4) legal subject matter, and (5) consideration. Additionally, the contract must be free from fraud, duress, undue influence, or mistake. Lager v. Berggren, 187 Wash. 462, 466-67, 60 P.2d 99 (1936). There must also be mutual assent on the essential terms of the agreement. McEachren v. Sherwood & Roberts, Inc., 36 Wn. App. 576, 579, 675 P.2d 1266 (1984). Mutual assent usually takes the form of an offer and acceptance. Yakima County (W. Valley) Fire Prot. Dist. No. 12 v. City of Yakima, 122 Wn.2d 371, 388-89, 858 P.2d 245 (1993). The mutual intent of contracting parties is determined by their objective acts or outward manifestations; any unexpressed subjective intentions are irrelevant. Multicare Med. Ctr. v. Dep't of Soc. & Health Servs., 114 Wn.2d 572, 587-88, 790 P.2d 124 (1990).
To succeed on a breach of contract claim, Ms. Hunt must demonstrate (1) the existence of a valid and enforceable contract, (2) her rights and Ms. Klassen's duties under the contract, (3) breach of the contract by Ms. Klassen, and (4) damages proximately caused by the breach. Citoli v. City of Seattle, 115 Wn. App. 459, 476, 61 P.3d 1165 (2002). Once Ms. Hunt demonstrates the existence of the contract and Ms. Klassen's objective manifestation of intent to be bound by the contract, the burden shifts to Ms. Klassen to demonstrate a defense to the enforcement of the contract. See Retail Clerks Health & Welfare Trust Funds v. Shopland Supermarket, Inc., 96 Wn.2d 939, 944, 640 P.2d 1051 (1982).
Contract formation. Ms. Klassen contends that no contract was formed between the parties for the sale and purchase of Ms. Hunt's business. Ms. Klassen maintains that several terms were not mutually understood by the parties. According to Ms. Klassen, these terms included: the sales price, whether the lease would be assigned by Ms. Hunt, the availability of Ms. Hunt to train Ms. Klassen, and how the purchase of the business would be financed.
But these terms were mutually understood by the parties. At trial, Ms....
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