Johnson v. Frame, LLC

• Court: Washington Court of Appeals
• Writing for the Court: SIDDOWAY
• Decision Date: 27 August 2013
• Citation: Johnson v. Frame, LLC (Wash. App. Aug 27, 2013)
• Parties: CHERI ABEL JOHNSON, Respondent, v. FRAME, LLC, Appellant.

CHERI ABEL JOHNSON, Respondent, v. FRAME, LLC, Appellant.

No. 30962-2-III

COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION THREE

FILED: August 27, 2013

UNPUBLISHED OPINION

SIDDOWAY, A.C.J. — Cheri Abel Johnson was granted summary judgment that a right of first refusal to purchase real property she granted to Frame LLC had expired, despite evidence that the parties' written agreement might have failed to reflect their actual understanding. Evidence presented by the LLC demonstrated a material dispute. Summary judgment in Ms. Johnson's favor is reversed and the case remanded for trial.

FACTS AND PROCEDURAL BACKGROUND

In 2000, Cheri Abel Johnson sold a portion of real property she owned in Columbia County to Frame LLC, whose members were then David and Harleen Frame, husband and wife. In connection with the sale, David Frame asked that the LLC be given a right of first refusal to acquire property Ms. Johnson was retaining, which wascontiguous. She agreed. Mr. Frame's attorney, Scott Marinella, drafted the closing documents that included a freestanding right of first refusal.

The parties' dispute concerns the duration of the right of first refusal. The sentence of the right that addresses duration reads:

These rights shall be for a term of (1) ten years from the date hereof, or (2) for as long as David E. Frame and Harleen M. Frame are members of Frame, LLC and Frame, LLC owns lands adjacent to lands owned by Cheri Lynn Abel [Johnson] . . . , whichever is greater.

Clerk's Papers (CP) at 7. The right of first refusal states that it "contains the entire agreement between the parties." Id.

Before the closing, Mr. Marinella circulated draft documents including the right of first refusal. After reviewing the documents, Mr. Frame sent an e-mail to Mr. Marinella stating that he and Ms. Johnson had "agreed to language in the First Refusal that requires Harleen and/or I to be a member of Frame, LLC for it to be exercisable. Otherwise the language is OK." CP at 19 (emphasis added). Mr. Marinella responded by e-mail several minutes later, "Ok, the Right of First Refusal and other documents will be ready for your signatures at the settlement Closing tomorrow." Id.

Ms. Johnson argues that she was not copied on the e-mail and never saw it, and that her only agreement with Mr. Frame was the agreement reflected in the right of first refusal signed by the parties: that the term of the right was 10 years or so long as both David and Harleen Frame were members of the LLC. Whatever the true facts, thechange requested by Mr. Frame was not reflected in the final version of the right of first refusal executed by the parties.

The duration provision has become material because Harleen Frame died several years after the parties entered into the right of first refusal, and in 2011 Ms. Johnson decided to sell her property to a third party. In a seller's disclosure statement she completed in March 2011, she indicated that the property was subject to a right of first refusal. After Mr. Marinella expressed a contrary opinion, however, she commenced this action, seeking a declaration that the right was no longer in effect. The LLC counterclaimed, alleging that "due to oversight, inadvertence or mutual mistake—and contrary to the true intention of the parties—or subsequent alteration then unknown by Frame" the executed right failed to reflect the parties' actual agreement. CP at 15. It sought a declaration that it continued to enjoy a right of first refusal.

Ms. Johnson moved for summary judgment, supporting her motion with her affidavit stating that she never agreed to the "and/or" language.

The LLC opposed the motion, supporting its opposition with Mr. Frame's declaration recounting the history of his and Ms. Johnson's negotiations and stating that she had agreed to the "and/or" language. The LLC also submitted the declaration of Garry Snyder, a real estate broker with whom Ms. Johnson had listed her property in 2011, in which Mr. Snyder stated that "[f]rom my discussions with Ms. Johnson at the time she listed the property and completed her seller's disclosure statement, it was clearto me that she regarded the Frame, LLC right of first refusal on the property to valid [sic] and in place." CP at 57.

Ms. Johnson countered with a letter from Mr. Marinella stating that he disagreed with the LLC's position that the right of first refusal still existed, in view of the fact that the right did not speak of David E. Frame "and/or" Harleen M. Frame. CP at 110.

Both Ms. Johnson's and Mr. Frame's declarations referred to the fact that a real estate purchase and sale agreement that preceded the closing by several months had contained its own provision dealing with the right of first refusal contemplated by the parties. The duration of the right in that agreement was couched in somewhat different language. That language had provided, as to duration, that

[t]hese rights shall be the greater of; [sic] ten years from the date hereof or, for as long as Frame owns lands adjacent to lands owned by [Johnson] described in this paragraph 12.

CP at 69.¹ Ms. Johnson testified that the change in the language to refer to the Frames' continued membership in the LLC was Mr. Frame's idea. Mr. Frame testified that Ms. Johnson had asked that the duration be limited by only his continued membership and, after discussing it with his wife, they countered with the suggestion that it be limited by either Mr. or Ms. Frame continuing to be a member.

The trial court granted Ms. Johnson's motion for summary judgment and declared that Ms. Johnson could offer and sell her property to any third party without obligation to offer it to the LLC. The LLC appeals.

ANALYSIS

The LLC contends on appeal that summary judgment was improper because there was a genuine issue of material fact whether the language limiting the duration of the right of first refusal to David "and" Harleen Frame's continued membership was the result of a scrivener's error or mistake. Alternatively, it argues that there was a genuine issue of fact whether the passing of Harleen Frame's membership interest to Mr. Frame as a trustee under her will either substantially satisfied the condition of her continued membership; "excuse[d] strict application" of a condition; or should be deemed, as an equitable matter, to excuse a condition to avoid a forfeiture. Br. of Appellant at 5-6.

The LLC provides no legal authority for any of the last three arguments and we know of none. It presented sufficient evidence in support of a claim for reformation to preclude summary judgment, however.

We address the arguments in turn.

I

Where a writing that evidences or embodies an agreement in whole or in part fails to express the agreement because of a mistake of both parties as to the contents or effect of the writing, the court may reform the writing to express the agreement. RESTATEMENT(SECOND) OF CONTRACTS § 155 (1981); Browning v. Howerton, 92 Wn. App. 644, 648 n. 1, 966 P.2d 367 (1998) (citing the Restatement). Cases granting relief under such circumstances often speak of "scrivener's errors" or similar terms that point up the mistake as one of transcription of the parties' actual agreement. RESTATEMENT § 155, Reporter's Note cmt. a (the comment cites, among other cases, Snipes Mountain Co. v. Benz Bros. & Co., 162 Wash. 334, 298 P. 714 (1931); Rolph v. McGowan, 20 Wn. App. 251, 579 P.2d 1011 (1978)); W. Coast Pizza Co. v. United Nat'l Ins. Co., 166 Wn. App. 33, 41, 271 P.3d 894 (2011) (mutual mistake); Wilhelm v. Beyersdorf, 100 Wn. App. 836, 843-44, 999 P.2d 54 (2000) (scrivener's error).

The party seeking reformation bears the burden of establishing facts demonstrating the parties' identical intention and the material variance from that intention in their written agreement by clear and convincing evidence. Maxwell v. Maxwell, 12 Wn.2d 589, 593, 123 P.2d 335 (1942) (citing RESTATEMENT OF CONTRACTS § 511, at 981 (1932)).

Ms. Johnson argues that reformation is not appropriate when the parties' intentions conflict and that her and Mr. Frame's declarations establish their directly conflicting intentions: she did not agree to "and/or" language, whereas Mr. Frame claims he did.

While reformation requires proof by clear, cogent, and convincing evidence, that standard does not require that the proof of the party seeking reformation be uncontradicted. Rolph, 20 Wn. App. at 256 (citing Noord v. Downs, 51 Wn.2d 611, 615,320 P.2d 632 (1958)). Ms. Johnson ignores the fact that Mr. Frame has testified that she, too, agreed to the "and/or" language in 2000. His position is that her contrary position now is either mistaken or untruthful. In reviewing a decision on summary judgment, we view all facts and reasonable inferences from the facts in a light most favorable to the nonmoving party. Jones v. Allstate Ins. Co., 146 Wn.2d 291, 300, 45 P.3d 1068 (2002). Mr. Frame's position that Ms. Johnson agreed to the "and/or" language in 2000 is supported not only by his testimony as to his and her direct negotiations, it finds further support in his contemporaneous e-mail to Mr. Marinella; his explanation of why the parties had modified the language of the purchase and sale agreement (whose language had favored Frame); and Ms. Johnson's completion of the seller disclosure form and conversations with Mr. Snyder, indicating that her property was subject to a right of first refusal.

Ms. Johnson also argues that any contention of scrivener's error...