Refrigeration Engineering Co. v. McKay
| Decision Date | 13 May 1971 |
| Docket Number | No. 290,290 |
| Citation | 486 P.2d 304,4 Wn.App. 963 |
| Court | Washington Court of Appeals |
| Parties | REFRIGERATION ENGINEERING CO., a Washington corporation, Respondent, v. Dean McKAY and Jane Doe McKay, his wife, Appellants and Respondents, v. C. E. LOVELESS, a resident of the State of Washington, and Jane Doe Loveless, his wife, and 64th and Yakima, Inc., a Washington corporation, Respondents and Cross-Appellants, Arctic Corporation, a Washington corporation, Defendant. (41172)--II. |
Nelson Christensen, Seattle, and Douglas F. Albert, Federal Way, for appellants and respondents McKay.
John E. Phillips, of Hillis, Phillips & Clark, Seattle, for respondents and cross-appellants Loveless.
Russell W. Newman and Joel E. Bradshaw, Seattle, for respondent Refrigeration Engineering Co.
When experienced, successful and confident shopping center promoters get together to develop, build and operate a shopping center, failure of the venture is often not contemplated. Considering the expertise and the apparent financial stability of the men involved in the initial promotion and development of a proposed supermarket at 64th Street and Yakima Avenue in Tacoma, perhaps the most remarkable occurrence is that the venture did fail. The failure of this venture precipitated the present lawsuit.
The plaintiff, Refrigeration Engineering Company, contracted with Dean McKay, who was to develop and operate the grocery store portion of the center, to sell and install various fixtures and cooling equipment for the proposed grocery store. When the shopping center failed to materialize as expected and it became apparent that McKay would not perform the contract, Refrigeration Engineering Company sued the McKays to recover its expected profit of $32,467.49. The McKays then initiated a third party action against C. E. Loveless and his wife to recover their share of any damages that might be adjudged due to Refrigeration Engineering Company. Mr. Loveless was an experienced real estate developer who had promoted the construction and financing of the shopping center.
The trial court found that the contract was breached by McKay and awarded Refrigeration a judgment against the McKays for its expected profit and attorney fees. The McKays were awarded a judgment against the third party defendants, C. E. Loveless and his wife, for one-half of the plaintiff's total award on the theory that the McKays and the Lovelesses were partners or joint venturers in the development of the proposed center and therefore had to share the losses incurred in the venture.
In 1962, Loveless and Arctic Corporation, a 'land holding' company wholly owned by Refrigeration, were equal shareholders in 64th and Yakima, Inc., a corporation formed for the express purpose of buildig a shopping center at 64th Street and Yakima Avenue in Tacoma, Washington. 64th and Yakima, Inc. bought the real property on which the proposed center was to be built. Through controlled corporations, Loveless and Refrigeration had collaborated in the development of other shopping centers.
Refrigeration had terminated its interest in 64th and Yakima, Inc. in 1963 through an escrow agreement with Loveless before McKay contracted with Refrigeration for the sale and installation of fixtures. By the terms of that agreement Refrigeration was to get back the money it had invested in 64th and Yakima, Inc. Refrigeration also obtained a commitment from Loveless that it would install the fixtures for the proposed supermarket. In return, Loveless was to become the sole shareholder of 64th and Yakima, Inc.
During the latter part of 1963, Loveless introduced McKay to Refrigeration as a possible tenant for the proposed shopping center and as a customer for the contemplated sale of Refrigeration's fixtures. Dean McKay, a resident of Oregon, was an experienced owner and operator of supermarkets in Oregon, particularly grocery stores. Loveless and Dean McKay had various prior business dealings in Oregon and were shareholders in Dean's, Inc., which owned and operated several supermarkets in Oregon.
Loveless and McKay agreed that they would develop the proposed center, open it and operate it during the first few months, incorporate and split the stocks equally, then either continue to operate the center for a profit or sell their stocks in the newly formed corporation. This was essentially the same pattern followed in their prior business ventures in Oregon.
In this venture, Loveless was to be responsible for the financing, construction, and placing of tenants for the entire shopping center. McKay was to be responsible for the financing and placement of fixtures in the grocery store, upon which primarily depends the success of the center as a whole. He was then to operate the grocery store for a period of time. There was also a possibility that McKay would operate the drug store himself or find a manager to operate it for him.
On November 9, 1964, after further discussion among Refrigeration, McKay and Loveless, Refrigeration presented to McKay a document entitled 'Proposal,' a detailed document in which Refrigeration proposed to furnish and install certain fixtures. The document was signed by Dean McKay in a space labeled 'Acceptance.' The trial court correctly held, upon substantial evidence, that this 'Proposal' became a binding contract when it was signed by Dean McKay.
Sometime after November 9, 1964, the development of the proposed center seemed to reach an impasse. Loveless was experiencing difficulties meeting the conditions required for obtaining the long term financing. At about the same time, Utah Wholesale Grocery Company, a large grocery supplier which had agreed to lease the premises became dissatisfied with the progress of the shopping center and stated it would cancel its lease of the proposed center. As a result of these developments, together with Loveless' inability to find tenants for other departments for the shopping center, the interim financing for the construction became impossible.
McKay expended less and less of his efforts on the development of the grocery store because of serious financial problems with his Oregon concerns. He could not decide whether or not he wanted to operate the drug store portion of the center. His efforts of finding another tenant to operate the drug store also proved unsuccessful. Refrigeration's officers testified that it became increasingly difficult to reach McKay for consultation as to further action.
On August 9, 1965, Refrigeration received a letter from Mr. Albert, an agent for McKay, which essentially was an offer to enter into a new contract. The court held that this letter was an anticipatory repudiation of the November 9, 1964 contract. That letter contained a positive statement to the promisee--Refrigeration--that McKay would not perform his contractual duties. Such a positive rejection justifies a finding that there was a breach of contract by anticipatory repudiation. Regional Enterprises, Inc. v. Teachers Ins. & Annuity Ass'n of America, 352 F.2d 768 (9th Cir. 1965); (The cited case involves the application of Washington law.) After such repudiation of the contract, it was no longer necessary for the plaintiff to perform or tender performance. 4 A. Corbin, Contracts § 977 (1951).
McKay first argues that the proposal was not meant to be the final contract, but was dependent upon Refrigeration obtaining fixture financing for him. However, there was substantial evidence for the trial court to base its finding that Refrigeration fulfilled its obligation in obtaining the required fixture financing.
Furthermore, McKay argues that it was incumbent upon Refrigeration to submit an itemized cost breakdown of each fixture item before a binding contract came into existence. Refrigeration's officers, on the other hand, testified that only a departmentalized cost breakdown of the various grocery store departments was required and that this was furnished by Refrigeration in its 'Proposal.' The trial court decided, upon substantial evidence, that Refrigeration had done all it was required to do with respect to the cost breakdown for the fixtures.
Even assuming that the letter of August 9, 1965 conclusively showed that McKay would not fulfill the terms of the fixture purchase contract, and would thereby constitute an anticipatory repudiation, McKay argues that a duty on his part to perform the contract never arose, because the completion of the shopping center building was a condition precedent to his contractual duty to perform. In essence, he argues that he is not liable for damages for breach of contract if there was never a duty upon him to perform the contract.
He therefore asks this court to reverse the trial court's finding that the successful completion of the building (at least to such a stage as to permit the installation of fixtures) was not an implied condition precedent to the duty of McKay to perform the equipment purchase contract, the failure or nonoccurrence of which would excuse such required performance. 1
Our review of the record convinces us that such an implied condition was inherent in this type of contract. The equipment was useless without a building in which it could be installed. Refrigeration's earlier involvement in promoting the development is virtually conclusive evidence of its knowledge and understanding that the shopping center was essential to the sale of its equipment. Its very purpose in initiating the project, together with Loveless, in order to 'lock-in' the sale refutes its contention that no such condition was contemplated. The sale of the fixtures was not meant to be an isolated transaction which obligated McKay to buy the fixtures under any circumstance.
Refrigeration's president, Stanley Young, testified:
Q. But wasn't it understood by all parties that the building had to be completed?
A. I suppose it was.
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Q. Until the building was ready for the...
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