Merrick v. Greear, No. 22139-3-III (WA 8/31/2004)
| Decision Date | 31 August 2004 |
| Docket Number | No. 22139-3-III,22139-3-III |
| Court | Washington Supreme Court |
| Parties | JERRY C. MERRICK, a married man as his separate estate, Appellant, v. JEFFREY I. GREEAR and CYNTHIA ANN GREEAR, husband and wife, Respondents and Cross-Appellants, PATRICIA J. CONNOLLY, fka PATRICIA J. MERRICK, Defendant. |
Appeal from Superior Court of Kittitas County. Docket No: 99-2-00291-4. Judgment or order under review. Date filed: 05/12/2003. Judge signing: Hon. Michael E Cooper.
Counsel for Appellant(s), John Strother Jr Moore, Velikanje Moore & Shore PS, PO Box 22550, Yakima, WA 98907-2550.
Counsel for Respondent/Cross-Appellant, Douglas Warr Nicholson, Cone Gilreath Ellis Cole & Anderson, PO Box 499, Ellensburg, WA 98926-0499.
This is a dispute over both a written contract for the sale of half of an apartment complex and an oral contract for the management of the entire complex. The primary question is whether the loose, oral agreement between the parties gave rise to a fiduciary obligation by the manager, Jeffrey I. Greear, to the owner, Jerry C. Merrick. The trial court concluded, based on the unique facts of the case, that there was no fiduciary relationship.
We agree first that the question was factually driven. And we further agree with the trial judge that, based on the facts here, Greear owed no fiduciary obligation to Merrick. We reverse the trial court's denial of a money judgment in favor of Greear based upon the miscalculation of an additional purchase price called for in the real estate contract. We disagree with the trial judge and conclude that Greear's claim for declaratory relief accommodates a money judgment. Finally, we find substantial evidence for the remaining challenged findings of fact and affirm the balance of the court's judgment.
Jerry C. Merrick owned a 190-unit apartment complex in Ellensburg, Washington. The complex consisted of two groupings of four buildings. The apartments and grounds were in extremely poor condition. Merrick had not painted or replaced carpets in 25 years. College students occupied the complex. And it had a high turnover rate.
Merrick hired Jeffrey I. Greear in 1994 as manager. In October 1994, Greear bought four of the buildings from Merrick by a written real estate contract. The price was $1.9 million, plus an additional purchase price in an amount to be determined according to a formula,1 payable in the event Greear sold or refinanced before the contract was paid.
Greear continued to manage the entire complex. He set the rental rate, and collected rents and other income. Merrick and Greear each received the income from his own complex. Routine operating and maintenance expenses, including vacancy costs and insurance were split 50-50. Greear assumed the entire cost of maintaining the shared pool and laundry facility, which were on his grounds. But Merrick's tenants had the use of both on the same terms as Greear's tenants.
The agreement required that Greear make capital improvements to the entire complex besides doing routine maintenance work on Merrick's apartments. Merrick was to finance improvements to his units, but expenditures over $1,000 required his prior approval. Greear received $500 per month for these services plus $2 a month for every $10 per month increase in the rent of Merrick's units.
The oral agreement was loose. Each man Clerk's Papers (CP) at 40-41 (Mem. Op.).
Merrick had been in the apartment business for over 20 years and `knew all of the ins and outs of apartment managing and taught Greear how to account for the income and expense.' CP at 41 (Mem. Op.). The two men `talked almost daily, and Merrick generally participated in all management decisions and was otherwise kept informed about apartment operations.' CP at 38 (Mem. Op.). Merrick inspected his units and discussed the operation with employees about six times a year. Greear sent Merrick a monthly accounting of income and expenses, along with a check for Merrick's split. Merrick's bookkeeper set up the format for these `split reports' according to Merrick's preferences.
In 1998, Merrick and Greear ended their relationship and became competitors.
In June 1999, Merrick sued Greear for an accounting, reimbursement for personal expenses charged to the business, and damages for negligent management. Two years later, in July 2001, Merrick amended the complaint to claim that Greear's accounting deficiencies amounted to a breach of fiduciary duty. Merrick complained that Greear had not upgraded the Merrick units, contrary to their agreement. And this left the apartments in poor condition and caused him losses.
Greear answered and counterclaimed against Merrick and Merrick's former wife, now Patricia Connolly. Both Merrick and Connolly had signed the real estate contract. Greear sought a declaration of rights under the contract, specifically the amount owed under the additional purchase price clause. His prayer for relief also included `such other and further relief as the Court may deem just and equitable.' CP at 10.
The case was tried to the bench. The court found that the apartments were in appalling condition from the outset. It found that Greear gave Merrick's units the same attention as his own. The court found no fiduciary relationship and rejected most of Merrick's damage claims. It found that Merrick had proved no additional expenses beyond those he would have incurred if the disputed maintenance and improvements had been timely performed. The court did enter judgment for Merrick for $30,402 improperly charged by Greear.
On Greear's counterclaim, the court found that Greear had overpaid by $12,197.71 on the real estate contract. The court entered a memorandum decision and findings and conclusions that Greear was entitled to a judgment against Merrick in that amount.
Merrick moved for reconsideration of both judgments. The court let stand Merrick's judgment against Greear, but withdrew Greear's judgment against Merrick. The court concluded that Greear's pleadings did not accommodate a money judgment—he had asked for declaratory relief only. The court denied Greear's motion to amend his pleadings to conform to the proof.
Merrick makes numerous assignments of error. But almost all stem from his contention that Greear owed him a fiduciary duty. He contends the court erred by not imposing upon Greear the burden to disprove each item of Merrick's alleged damages. In other words, Merrick contends the court erroneously required him to prove his damages. Merrick argues that as a fiduciary, Greear had the burden to account and thus the burden of proof. Greear assigns error to certain items of damages in the judgment. He also contends the court was required to enter the money judgment on his counterclaim.
Both parties ask us to substitute our judgment for that of the trial court on a number of factual issues.
Where judicial interpretation of a contract is sought based on the credibility of extrinsic evidence or reasonable inferences to be drawn from that evidence, interpretation of the contract is a question of fact. Berg v. Hudesman, 115 Wn.2d 657, 668, 801 P.2d 222 (1990); Restatement (Second) of Contracts sec.sec. 212, 214(c) (1981). Factual disputes are resolved exclusively by the trial court. Berg, 115 Wn.2d at 668; DeCoria v. Red's Trailer Mart, Inc., 5 Wn. App. 892, 894, 491 P.2d 241 (1971). We will not substitute our judgment for that of the trial court on questions of fact. Knapp v. Hoerner, 22 Wn. App. 925, 929, 591 P.2d 1276 (1979). `Substantial evidence is evidence in sufficient quantum to persuade a fair-minded person of the truth of the declared premise.' Ridgeview Props. v. Starbuck, 96 Wn.2d 716, 719, 638 P.2d 1231 (1982).
The bulk of Merrick's challenges to the findings are based on his insistence that Greear owed him a fiduciary duty. And the court should then have placed the burden on Greear to prove every item of his accounting instead of requiring Merrick to prove his allegations of accounting errors. Merrick argues that this fundamental error resulted in findings not made that should have been made and vice versa. We will not revisit the facts. We agree with the trial judge's conclusion that Greear did not owe Merrick a fiduciary duty. Merrick's factual challenges then fail.
The bulk of Merrick's argument flows from his contention that Greear breached a fiduciary duty to the extent he failed to render complete and accurate accounts.
The trial judge here listened to six days of testimony and was unable or unwilling to categorize the legal relationship created by the agreement here. Neither can we. And so the question we address is whether the relationship created by this loose oral agreement, whatever it was, imposed upon either of these parties some fiduciary obligations. We agree with the trial court that it did not.
After reviewing the trial court's findings of fact for substantial evidence, we determine whether the facts give rise to a fiduciary duty as a question of law. Our review is de novo. Hansen v. Friend, 118 Wn.2d 476, 479, 824 P.2d 483 (1992); S.H.C. v. Lu, 113 Wn. App. 511, 524, 54 P.3d 174 (2002), review denied, 149 Wn.2d 1011 (2003).
A fiduciary relationship arises as a matter of law in certain relationships— between, for example, attorney and client, doctor and patient, trustee and beneficiary. A fiduciary relationship may also arise from particular facts. Liebergesell v. Evans, 93 Wn.2d 881, 890, 613 P.2d 1170 (1980); Micro Enhancement Int'l, Inc. v. Coopers & Lybrand, L.L.P., 110 Wn. App. 412, 435, 40 P.3d...
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