Kruse v. Hemp

• Decision Date: 24 June 1993
• Docket Number: No. 59573-9,59573-9
• Citation: 853 P.2d 1373,121 Wn.2d 715
• Court: Washington Supreme Court
• Parties: Michael KRUSE and Kay W. Kruse, husband and wife, Respondents, v. Fred HEMP and Emma Hemp, husband and wife, and the marital community composed thereof, Petitioners. En Banc

Page 715

121 Wn.2d 715

853 P.2d 1373

Michael KRUSE and Kay W. Kruse, husband and wife, Respondents, v. Fred HEMP and Emma Hemp, husband and wife, and the marital community composed thereof, Petitioners.

No. 59573-9.

Supreme Court of Washington,

En Banc.

June 24, 1993.

Frits & Knowles, James W. Frits, Bothell, for petitioners.

Brett & Daugert, Larry Daugert, Bellingham, for respondents.

GUY, Justice.

Petitioners Fred and Emma Hemp (Hemp) challenge a Court of Appeals decision holding that they waived their right to appeal the trial court's partial grant of summary judgment in favor of respondents Michael and Kay Kruse (Kruse) by accepting the benefits of that decision. We reverse and remand for further proceedings.

In April 1985, the parties executed a 5-year lease agreement for the premises located at 1611 North State Street, Bellingham, Washington. Kruse operates the Bellingham Chiropractic Center, Inc., P.S. (BCC, Inc.) at that location. The lease listed Hemp as lessor and BCC, Inc. as lessee.

The lease agreement contained an option to purchase, which reads as follows:

11. TERMS OF OPTION.

In consideration of Ten Dollars ($10.00), Lessee or its assigns is granted an option to purchase the demised premises at any time within six (6) months of the termination of this Lease. The option is exercisable by written notice to the Lessors, either delivered personally or by certified mail. Lessee agrees that the option monies are absolutely non-refundable in the event that Lessee fails to elect to exercise this option.

(a) Purchase Price: The purchase price of the property according to this option shall be Two Hundred Sixty Five Thousand Dollars ($265,000.00).

(b) Payment: At the time this option is exercised, Lessee shall pay to Lessors the sum of Ten Thousand Dollars ($10,000.00) as a down payment. The balance of the purchase shall be paid as follows:

Lessee shall execute a Real Estate Contract in the amount of Two Hundred Fifty Five Thousand Dollars ($255,000.00), which obligation shall bear interest at a rate computed as follows:

Twelve percent per annum, plus the excess if any, of the Seafirst prime rate over fourteen percent; or twelve percent less the amount, if any, that Seafirst prime rate is under ten percent. Such interest rate shall be adjusted semiannually.

The monthly payments shall amortize the liability over twenty five (25) years, but shall not exceed Three Thousand Five Hundred Dollars ($3500.00).

(c) Closing: Closing shall occur within thirty (30) days of Lessee's exercise of this option to purchase, but not prior to April 1, 1990. Usual and customary closing costs shall be borne by each party in accordance with standard real estate practice.

Clerk's Papers, at 131. The lease agreement provided the street address of the property at issue, but did not describe the property by lot number, block number, and addition. Through an oversight, the legal description of the property was not attached to the lease agreement.

In March 1990, BCC, Inc. exercised the option to purchase, and subsequently assigned its rights under that option to Kruse. As optionee, Kruse tendered a real estate contract to Hemp, who refused to execute the contract because it failed to recognize an easement over the property at issue (lot B) in favor of an adjacent lot (lot C) owned by Hemp.

Kruse filed suit in May 1990, seeking a decree of specific performance ordering Hemp to execute the real estate contract and an award of reasonable attorney fees pursuant to a provision of the lease agreement, which reads:

In the event suit shall be brought regarding the performance of the terms and provisions of this Agreement, ... then the prevailing party shall be entitled to reasonable attorney's fees....

Clerk's Papers, at 134.

Hemp answered the complaint and moved for summary judgment on grounds the indefiniteness of the option contract rendered specific performance inappropriate and, alternatively, requesting the court to declare valid an easement over lot B in favor of lot C.

Kruse filed a cross motion for summary judgment, arguing on grounds of partial performance and estoppel that the failure to include a legal description of the property did not render the option contract void. In addition, Kruse contended Hemp may be ordered to execute a real estate contract to which the parties did not previously agree because the Limited Practice Board has approved only one real estate contract form, all of the terms of which favor Hemp. See generally APR 12. Finally, Kruse argued the requested easement was unwarranted because Kruse had no notice of the easement prior to signing the lease and the easement was not necessary for access to lot C.

The trial court granted partial summary judgment in favor of Kruse, ordering Hemp to sign the tendered real estate contract, and the trial court awarded partial summary judgment in favor of Hemp, granting an easement against lot B in favor of lot C, State Street Short Plat, Bellingham, Washington. The trial court denied the requests of both parties for reasonable attorney fees.

In July 1990, pursuant to the court's order, Hemp executed the real estate contract, which reflected the easement in favor of lot C. Kruse subsequently appealed the trial court's grant of an easement in favor of Hemp and the trial court's denial of attorney fees. Hemp then cross-appealed, arguing specific performance did not constitute an appropriate remedy and requesting attorney fees and costs.

In an unpublished opinion, the Court of Appeals reversed in part and remanded for further proceedings on the easement issue. Kruse v. Hemp, cause 26842-2-I (Apr. 13, 1992), slip op. at 1, 8. The Court of Appeals held, by retaining the $10,000 down payment and the subsequent monthly payments, Hemp accepted the benefits of the trial court's decision and waived the right to appeal the specific enforcement of the option contract. Kruse, slip op. at 5. On the other hand, the court held Kruse had not waived the right to appeal because Kruse had complied with RAP 2.5(b) by procuring an order from the trial court waiving the security requirement. Kruse, slip op. at 4.

The Court of Appeals further determined that Kruse had no constructive or actual notice of the disputed easement at the time the lease was executed, and that a genuine issue of material fact existed, which precluded summary judgment and thus required remand, regarding whether lot C would be landlocked without the easement. Kruse, slip op. at 7-8. Finally, the court found Kruse to be the sole prevailing party for purposes of awarding attorney fees because the easement issue constituted a matter outside the provisions of the lease agreement. Kruse, slip op. at 8-9. As a consequence, the Court of Appeals held Kruse was entitled to reasonable attorney fees at trial and on appeal. Kruse, slip op. at 9.

Hemp petitioned this court for review, presenting only the appeal waiver issue. Hemp does not contest the Court of Appeals ruling on the easement issue and did not renew the substantive grounds for assigning error to the trial court's order of specific performance. Likewise, Kruse did not address the substantive issues, arguing only that Hemp waived the right to appeal and requesting attorney fees for responding to Hemp's petition for review.

I

The Court of Appeals sua sponte determined Hemp waived the right to appeal by violating RAP 2.5(b), which provides in part:

(1) Generally. A party may accept the benefits of a trial court decision without losing the right to obtain review of that decision only (i) if the decision is one which is subject to modification by the court making the decision or (ii) if the party gives security as provided in subsection (b)(2) or (iii) if, regardless of the result of the review, the party will be entitled to at least the benefits of the trial court decision.

(2) Security. If a party gives adequate security to make restitution if the decision is reversed or modified, a party may accept the benefits of the decision without losing the right to obtain review of that decision. The trial court making the decision shall fix the amount and type of security to be given by the party accepting the benefits.

The primary purpose of RAP 2.5(b) is "to ensure that a party seeking review will be able to make restitution if a decision is reversed or modified on appeal." Scott v. Cascade Structures, 100 Wash.2d 537, 541, 673 P.2d 179 (1983) (citing Comment, RAP 2.5(b)(2), 86 Wash.2d 1152-53 (1976)).

In the case before us, none of the three scenarios outlined in RAP 2.5(b)(1) apply; however, this case falls within an additional exception first identified by the Court of Appeals in Chan v. Smider, 31 Wash.App. 730, 644 P.2d 727 (1982). In Chan, the trial court specifically enforced the sale of an apartment house. Pursuant to the trial court's decree, the sellers executed a real estate contract and the buyer deposited the purchase money in the court registry. Chan, 31 Wash.App. at 733-34, 644 P.2d 727. Following an accounting of rents and offsets, the sellers withdrew their share of the amount deposited in the court registry. Chan, 31 Wash.App. at 734, 644 P.2d 727.

The sellers subsequently appealed the trial court's award of specific performance. The buyer moved to dismiss the appeal on grounds the sellers had waived their right to appeal by accepting the benefits of the trial court's decision, i.e., by withdrawing funds from the court registry. The Court of Appeals, however, held the sellers did not waive their right to appeal because, "[t]o secure return of the money that the [sellers] withdrew from the court registry, [the buyer] has the apartment building of substantially greater value." Chan, 31 Wash.App. at 734, 644 P.2d 727.

The case before us presents a similar situation. Hemp received a $10,000 down payment. In addition, Hemp retained subsequent monthly payments, the total amount of which the record does not reflect; however, if...