Torgerson v. One Lincoln Tower, LLC
| Citation | 166 Wn.2d 510,210 P.3d 318 |
| Decision Date | 25 June 2009 |
| Docket Number | No. 80623-3.,80623-3. |
| Court | United States State Supreme Court of Washington |
| Parties | Joanne Faye TORGERSON, as trustee for the Torgerson Family Trust, Petitioner, v. ONE LINCOLN TOWER, LLC, a Delaware limited liability company; Bellevue Master, LLC, a Delaware limited liability company; LS Holdings, LLC, a Washington limited liability company, Respondents. Michael Miller and Vicki Ringer, both individuals, Petitioners, v. One Lincoln Tower, LLC, a Delaware limited liability company; Bellevue Master, LLC, a Delaware limited liability company; LS Holdings, LLC, a Washington limited liability company, Respondents. |
Dennis John McGlothin, Olympic Law Group PLLP, Seattle, WA, for Petitioners.
David A. Nold, Brian Michael Muchinsky, Nold & Associates PLLC, Bellevue, WA, for Respondents.
Scott Emmett Hildebrand, Attorney at Law, Bellevue, WA, Amicus Curiae on behalf of Master Builders Association.
¶ 1 We are asked to determine whether a real estate contract can limit buyers' remedies for breach to the return of their deposits and certain money spent on improving the property. Petitioners are licensed real estate agents for a condominium development who also bought residential units there. As condominium buyers, the agents want the court to strike down a contract clause that limited their remedies in case of sellers' breach to the return of their deposits, or "earnest money," and any nonrefundable sums paid to third parties to improve their units.
¶ 2 The real estate agents argue the limitation on remedies is unconscionable, fails its essential purpose to provide a meaningful remedy, and is otherwise unenforceable because it contravenes public policy. The sellers counter that the remedies limitation was unambiguously spelled out in the purchase and sale agreement, and Washington should uphold freedom of contract. The agents maintain the Court of Appeals erred when it affirmed summary judgment in favor of the sellers and awarded them attorney fees. We affirm and award sellers attorney fees on appeal.
¶ 3 Petitioners Michael Miller, Vicki Ringer, and Joanne Faye Torgerson (collectively Buyers) seek review of a Court of Appeals, Division One, decision that affirmed summary judgment in favor of One Lincoln Tower, LLC; Bellevue Master, LLC; and LS Holdings, LLC (collectively Sellers). In 1997 Ian Gillespie, a Canadian developer, began working on a large mixed-used project that would span five acres in downtown Bellevue. Gillespie formed One Lincoln Tower, LLC and set to work on the project, which was to include an underground parking garage, retail space, an office tower, a four-star hotel, and 148 luxury condominium units. Bellevue Master, LLC, the legal entity selling the units, authorized Buyers Miller, Ringer, and Torgerson as licensed real estate agents to list and sell the condominiums.
¶ 4 In the summer of 2001, Buyers contracted to purchase residential units in the complex for themselves. Miller and Ringer put down only a $5,000 deposit, and assigned $11,606 of their condominium sales commissions to be paid seven days prior to closing, totaling about five percent of their unit's $332,220 purchase price. Miller and Ringer added to the contract that they "may elect to mix standard color schemes. ..." Miller Clerk's Papers (MCP) at 17. Torgerson, in turn, bought a $1,318,000 unit on behalf of the "Torgerson Family Trust." Torgerson Clerk's Papers (TCP) at 13. She paid only $5,000 up front and assigned about $126,000 of her commissions, to be paid at closing, totaling a 10 percent deposit on her condominium's price tag. Torgerson also amended the contract to request an independent inspection form and to reserve the right to interchange her unit's interior finishings.
¶ 5 The contracts Buyers signed contained a provision limiting remedies under the bold-face heading, MCP at 22; TCP at 19. Therein lies the rub. The clause provides, in relevant part:
If Buyer fails, without legal excuse, to close this transaction as and when required by this Agreement, Seller may terminate this Agreement and all of the rights granted to Buyer herein and retain the Deposit and any interest earned thereon as its sole and exclusive remedy;. ... [A]ny default by Seller under this Agreement ... shall enable Buyer, as its sole and exclusive remedy, to terminate this Agreement and recover from Seller the portion of the Deposit paid by Buyer and any nonrefundable sums reasonably paid by Buyer to unrelated third parties that are authorized by Seller in writing to alter or improve the Unit....
¶ 6 In addition, Sellers had Buyers sign a separate page that repeated, in capital letters,
SELLER AND BUYER INITIAL THIS PAGE TO CONFIRM THEIR AGREEMENT IN SECTION 21 OF THIS AGREEMENT, WHICH PROVIDES THAT IF BUYER FAILS, WITHOUT LEGAL EXCUSE, TO CLOSE THIS TRANSACTION AS AND WHEN REQUIRED BY THIS AGREEMENT, SELLER MAY TERMINATE THIS AGREEMENT AND RETAIN THE DEPOSIT AND ANY INTEREST EARNED THEREON AS ITS SOLE AND EXCLUSIVE REMEDY FOR SUCH FAILURE.
MCP at 15; TCP at 14. This page did not repeat the corresponding remedy limitation for Buyers in case Sellers breached. The contract also provided that if Buyers' units were not substantially completed by December 31, 2003, they had the right to rescind their contracts and get their deposits back.
¶ 7 In December 2001 Sellers amended their standard contracts for all new condominium purchases. The revised version did not contain the limitation on remedies and allowed future buyers to seek their deposits back as well as other remedies but not consequential or punitive damages. Miller and Torgerson, as real estate agents for the condominiums, were informed of the contract changes by e-mail and asked for their input. The record shows no input from Torgerson, while Miller e-mailed back about the new contract, but referenced the new completion date, not the limitation on remedies.
¶ 8 In 2002 the project stalled, and One Lincoln Tower sold the development and all its interests to LS Holdings, LLC in August 2003. In December 2003 all condominium buyers received a letter signed by Ringer as agent, saying that despite the new ownership and the need to "redocument" purchases with updated completion dates and unit interiors, buyers still had the right to purchase their condominiums for the same price, and any changes to existing contracts would be "minimal." MCP at 56-57; TCP at 54-55. The letter also said all buyers had the right to withdraw from the project and receive their deposits back, which had been held in escrow.
¶ 9 In May 2004 LS Holdings terminated the contracts with Buyers Miller, Ringer, and Torgerson by letter and authorized return of their deposits, claiming in part that Torgerson had breached her fiduciary duty by referring an unrepresented buyer to an outside agent. In November 2004 Buyers sued Sellers in two separate cases for breach of contract, seeking specific performance or money damages and attorney fees and costs. Sellers admitted breach but contended Buyers were limited by contract to return of their deposits and filed a counterclaim for rescission based on breach of Buyers' fiduciary duties as real estate agents. Sellers moved for summary judgment in 2005, asking the trial court to enforce the limitation on remedies and to dismiss Buyers' actions once the deposits, and any interest earned on them, were returned. Buyers filed a cross motion for summary judgment, arguing the limitation on remedies was unconscionable and unenforceable.
¶ 10 On May 6, 2005, the trial court heard the motions in both cases together, and three days later entered an order granting summary judgment in favor of Sellers. The court ordered Sellers to return Buyers' deposits within five days and did not award either side attorney fees, conditioning dismissal of the cases on the return of the earnest money. The court also denied Buyers' motions to amend their complaints to add claims for promissory estoppel and denied Sellers' motion for attorney fees, which Sellers claimed they had a right to under the contract. In an unpublished opinion, the Court of Appeals affirmed the summary judgment decision, but reversed the denial of attorney fees and costs, saying Sellers were entitled to them as the prevailing parties. Miller v. One Lincoln Tower, LLC, noted at 139 Wash.App. 1018, 2007 WL 1733170, at * 6 (2007). We granted review on four issues (1) whether the limitation on remedies is unconscionable; (2) whether the limitation fails its essential purpose; (3) whether the limitation is void for public policy reasons; and (4) whether Sellers or Buyers are entitled to attorney fees. 163 Wash.2d 1044, 187 P.3d 271 (2008).
¶ 11 We review summary judgments de novo. Troxell v. Rainier Pub. Sch. Dist. No. 307, 154 Wash.2d 345, 350, 111 P.3d 1173 (2005). Whether a contract is unconscionable is a question of law reviewed de novo. Adler v. Fred Lind Manor, 153 Wash.2d 331, 344, 103 P.3d 773 (2004). That includes the question of whether a limitation on remedies is unconscionable. M.A. Mortenson Co. v. Timberline Software Corp., 140 Wash.2d 568, 585, 998 P.2d 305 (2000). Whether a contract or statute authorizes an award of attorney fees is also a question of law reviewed de novo. Schlener v. Allstate Ins. Co., 121 Wash.App. 384, 388, 88 P.3d 993 (2004).
¶ 12 "It is black letter law of contracts that the parties to a contract shall be bound by its terms." Adler, 153 Wash.2d at 344, 103 P.3d 773. Here, Buyers argue they should be excused from the terms of the contract because the limitation on remedies is both procedurally and substantively unconscionable. The Court of Appeals did not analyze Buyers' unconscionability claims, reasoning these arguments, along with the ...
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