Silverdale Hotel Associates v. Lomas & Nettleton Co.

• Decision Date: 02 March 1984
• Docket Number: No. 5961-4-II,5961-4-II
• Citation: 677 P.2d 773,36 Wn.App. 762
• Court: Washington Court of Appeals
• Parties: SILVERDALE HOTEL ASSOCIATES, Respondent, and Wick Construction Company, Intervenor-Respondent, v. The LOMAS & NETTLETON COMPANY, a Connecticut corporation; Lomas & Nettleton Financial Corp., a Delaware corporation; and L & N Management, Inc., a foreign corporation, Appellants.

Page 762

36 Wn.App. 762

677 P.2d 773

SILVERDALE HOTEL ASSOCIATES, Respondent and Wick Construction Company, Intervenor-Respondent, v. The LOMAS & NETTLETON COMPANY, a Connecticut corporation Lomas & Nettleton Financial Corp., a Delaware corporation; and L & N Management Inc., a foreign corporation, Appellants.

No. 5961-4-II.

Court of Appeals of Washington Division 2.

March 2, 1984.

Review Denied June 8, 1984.

Peter L. Slinn, Seattle, Larry M. Lesh, Dallas, for appellants.

John Burgess, Paul R. Cressman, Seattle, for respondent Silverdale Hotel.

Herman S. Siqueland, Seattle, for intervenor-respondent Wick Construction.

WORSWICK, Judge.

Once again we are called upon to deal with litigation arising out of that unfortunate but familiar occurrence: a grand plan for real estate development gone awry. Cf. Irwin Concrete, Inc. v. Sun Coast Properties, Inc., 33 Wash.App. 190, 653 P.2d 1331 (1982).

On December 15, 1978, Savings Investment Service Corporation (SISCorp) issued a commitment letter for a permanent mortgage loan of $4.5 million dollars to Silverdale Hotel Association (Silverdale) for a new hotel. On January 27, 1979, National Homes Acceptance Corporation (National) agreed to loan Silverdale $4,275,000 for construction. After obtaining the permanent and construction loans, Silverdale contracted with Wick Construction Co. to build the hotel. In May 1979, National made the first loan disbursement to Silverdale, and Wick began construction.

National merged into Lomas & Nettleton Co. (L & N) on July 6, 1979. ¹ On July 23 Silverdale submitted its second draw request to L & N to pay for work completed by Wick. L & N refused to fund the draw until Silverdale supplied L & N with final plans and cost estimates for the hotel. Wick then suspended work on the project. On August 16 Silverdale submitted its third draw request for work completed by Wick. L & N responded by demanding that Silverdale deposit $1,200,000 for L & N within five days or be in default of the construction loan agreement. Silverdale refused to pay the deposit, and could not obtain other financing. Silverdale sued L & N for breach of the construction loan agreement and Wick intervened as a plaintiff. The trial court held L & N liable to Silverdale and Wick. L & N appeals. Silverdale cross-appeals the damages award and the trial court's refusal to award it attorney's fees.

Primarily at issue is whether the trial court's findings of fact support its conclusion that L & N breached the construction loan agreement with Silverdale. Other significant issues are whether the trial court erred (1) in concluding L & N is liable to Wick; (2) in concluding Wick is entitled to lost profits and prejudgment interest; and (3) in failing to award Silverdale certain expenses and attorney's fees. Other satellite issues are also raised. We reverse the trial court's award of lost profits to Wick and its failure to award attorney's fees to Silverdale. Otherwise, we affirm.

SILVERDALE/CONSTRUCTION LOAN AGREEMENT

L & N contends the trial court erred in concluding it breached the construction loan agreement with Silverdale. Although a substantial part of its brief was devoted to arguing the facts, L & N has not properly assigned error to any of the findings of fact. See United Nursing Homes, Inc. v. McNutt, 35 Wash.App. 632, 669 P.2d 476 (1983). ² Therefore they are verities on appeal. Yakima Cement Prods. Co. v. Great American Ins. Co., 93 Wash.2d 210, 608 P.2d 254 (1980). Consequently, our review is limited to determining whether the findings of fact support the trial court's conclusions of law and judgment. In re Santore, 28 Wash.App. 319, 623 P.2d 702 (1981). A summary of the findings follows.

On January 27, 1979, National and SISCorp agreed with Silverdale that the "fast-track" method of construction would be used for the hotel project. By "fast-track," they meant that successive partial building permits would be obtained, first for site development, then for foundation work and, finally, for the actual structure. Construction would commence before the final building permit was obtained and while final plans and specifications were still being prepared. National and Silverdale never had a fully integrated writing containing all the terms and conditions of their construction loan agreement. National agreed orally with Silverdale that it would advance loan funds up to $500,000 to pay for work Wick performed before completion and approval of the final plans and specifications. At the time the loan was closed, the parties agreed that Silverdale would give National the detailed estimated cost breakdown after the final plans had been completed and Silverdale had obtained the final building permit. Both Silverdale and National expected the cost information would be provided in September when Silverdale submitted Wick's draw request for work done in August.

On July 24, L & N received Silverdale's second draw request. Part of that request was for money owed to Wick. L & N refused to pay the draw request until Silverdale provided L & N with final plans and specifications and a final cost breakdown. On August 13, L & N informed Silverdale that no draw requests would be funded until Silverdale provided L & N with final plans and cost estimates. L & N then knew that final plans and specifications had not been completed under the fast-track method of construction. Accordingly, L & N's demands of August 13 were unreasonable. On August 16, Silverdale submitted to L & N its third draw request for work performed by Wick. Both the second and third draw requests accurately represented the amount owed on Wick's work. L & N responded by demanding Silverdale deposit $1,200,000 in cash in Dallas, Texas, or be in default of the construction loan agreement. L & N's actions throughout its handling of Silverdale's construction loan were unreasonable and evidenced an unwillingness to act in good faith or to assist Silverdale in reasonable efforts to complete the hotel project successfully. As a result of L & N's refusal to fund Wick's interim draw requests, Silverdale was unable to pay Wick the sums due under the construction contract.

In short, the findings establish that (1) L & N promised Silverdale it would fund Wick's draw requests up to $500,000 while final plans were being established; (2) the agreement did not require Silverdale to submit final plans to L & N until the middle of September; (3) L & N refused to fund Wick's draw requests for work completed before August until Silverdale submitted final plans, a final cost breakdown, and a $1,200,000 deposit; and (4) L & N's failure to fund the interim draw requests caused Silverdale to be unable to pay Wick. The findings of fact support the trial court's conclusion that L & N breached its construction loan agreement with Silverdale.

L & N contends the trial court erred in giving effect to the oral portions of the construction loan agreement because they conflict with the following sections of the written agreement:

9.01 All such advances or parts of advances will be made subject to the following conditions as to each advance, each of which Owner covenants to fulfill: ... (g) That the Owner furnish to NHAC [National] evidence satisfactory to NHAC [National] that the undisbursed proceeds of this loan will be sufficient to pay the cost of completing construction.

10.01 ... and NHAC [National] shall not be required to make any disbursement hereunder if the undisbursed proceeds of the loan shall be less than the amount necessary to pay for the completion of construction of all improvements contemplated hereby. If for any reason the undisbursed loan proceeds shall at any time be insufficient for such purpose, Owner will within five (5) days after written request by NHAC [National] deposit the deficiency with NHAC [National] and such deposit shall be first disbursed in the manner provided in Exhibit C hereof before any further disbursements of this loan shall be made....

We disagree.

Whether or not the parties' entire agreement has been incorporated in the writing is a question of fact. Barber v. Rochester, 52 Wash.2d 691, 328 P.2d 711 (1958). Where a written contract is not a complete integration of the parties' intent, the court may consider evidence of oral agreements to supply the missing terms of the contract, insofar as they are not inconsistent with the written terms. Cromwell v. Gruber, 7 Wash.App. 363, 499 P.2d 1285 (1972). The trial court found that the writing was not a complete integration of the construction loan agreement. Detailed cost estimates for the hotel were not part of the agreement, ³ and there were other omissions. The court supplied the missing terms by considering the oral agreement to use the fast-track method of construction. The court found the terms were not part of the writing because, at the loan closing, Silverdale and National agreed orally that final plans and detailed cost estimates would be sent to National in mid-September when a final building permit was obtained. Paragraphs 9.01 and 10.01 are not inconsistent with the oral agreement. They were intended to apply to construction advances requested after the final plans were submitted. Until final plans were completed, Silverdale could not provide evidence to National that the undisbursed proceeds of the loan would be sufficient to pay the cost of completing construction. The trial court did not err in enforcing the oral agreements.

L & N contends the evidence at trial showed Silverdale sent unsuitable plans to L & N in July, representing them to be "final plans." L & N claims this breached the loan agreement, and we may and should consider the evidence that L & N contends supports this proposition because there is no finding negating it. We disagree for two reasons.

First, if there is no express finding upon a material fact, the fact is deemed to have been found against the party having the burden of proof. Seattle Flight...