Opinion
No. 60239-0-I.
January 22, 2008.
Appeal from a judgment of the Superior Court for Whatcom County, No. 06-2-02826-7, Ira Uhrig, J., entered June 1, 2007.
Affirmed by unpublished per curiam opinion.
Gary Baker appeals an order granting summary judgment to Lance and Gina Heslep. Baker contends he should be refunded a portion of the $50,000 he paid pursuant to a purchase and sale agreement addendum which he drafted and which designated the payments "non-refundable." We disagree and affirm the trial court.
BACKGROUND
Lance and Gina Heslep put their Bellingham home up for sale for $349,000. They had already agreed to buy another home and wanted to sell their existing home quickly to avoid dual mortgage payments.
Gary Baker initially offered to buy the home for $339,000 with no nonrefundable deposit, and proposed to close the deal in 40 or 45 days. The Hesleps refused the offer and counteroffered to sell the home for $343,900, closing in 30 days. Baker eventually made another offer to buy the property for $343,900, but the terms of that offer gave Baker more than three months to close and allowed him to lease the home and make certain improvements prior to closing.
To persuade the Hesleps to accept his offer, Baker proposed an addendum to the purchase and sale agreement:
1. Buyer [Baker] agrees to pay $10,000.00 earnest money within two days of mutual acceptance of this offer. Earnest money is non-refundable and may be released by escrow immediately to seller.
2. Buyer will pay an additional $40,000.00 (non-refundable) into escrow no later than 5-12-06. Said $40,000.00 may then be paid (released) to the Seller.
3. Buyer agrees to pay remaining of $293,900 balance to escrow no later than June 30, 2006.
Clerk's Papers at 52. After modifying the terms to accelerate payment of the $40,000 from the originally proposed June 30, 2006, the parties signed the agreement. Baker made all but the final payment without objection.
Baker was unable to obtain sufficient funds to close by June 30, so the parties extended the closing date by one month to July 30, 2006. Baker was still unable to complete the purchase, and refused to vacate the premises. The Hesleps had Baker evicted by December 2006. After repairing damage, the Hesleps eventually received another offer to buy the home for a substantially reduced price.
Baker demanded a refund, and the Hesleps refused. Baker initiated this lawsuit, claiming the purchase and sale agreement limited the Hesleps' remedy to forfeiture of earnest money deposits not exceeding five percent of the purchase price. The trial court granted the Hesleps summary judgment. Baker appeals.
DISCUSSION
We apply the usual standard of review on summary judgment. Here, the parties agree there are no issues of material fact and debate only the interpretation of the contract and whether and how RCW 64.04.005 applies. "Interpretation of a contract provision is a question of law only when (1) the interpretation does not depend on the use of extrinsic evidence, or (2) only one reasonable inference can be drawn from the extrinsic evidence." Tanner Elec. Coop. v. Puget Sound Power Light Co., 128 Wn.2d 656, 674, 911 P.2d 1301 (1996).
When reviewing a trial court's decision to grant summary judgment, we engage in the same inquiry as the trial court. Halleran v. Nu West, Inc., 123 Wn. App. 701, 709, 98 P.3d 52 (2004). We affirm a ruling granting summary judgment when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. CR 56(c). All facts and reasonable inferences therefrom must be considered in the light most favorable to the nonmoving party. Id. at 709-10.
Baker contends he is entitled to refund of most of his $50,000 deposit under the purchase and sale agreement's preprinted provisions concerning the buyer's default. These terms provided that the "portion of the Earnest Money that does not exceed five percent (5%) of the Purchase Price shall be forfeited to the Seller as the sole and exclusive remedy to Seller for" the buyer's failure to complete purchase of the property. Clerk's Papers at 46.
We agree the contract provides for earnest money forfeiture as the seller's sole remedy in the event of the buyer's default, and that the amount to be forfeited may not exceed five percent of the purchase price. However, only $10,000 of the money Baker paid was identified as earnest money in the agreement. Since this amount is less than five percent of the purchase price, the Hesleps are entitled to keep it. See RCW 64.04.005.
The Hesleps argue that the earnest money forfeiture provision is ineffective because it was not separately initialed. The Hesleps rely on a version of RCW 64.04.005 that was superseded before the parties entered into the agreement at issue. See 2005 Wash. Laws ch. 186, § 1. The applicable version of the statute does not require that procedure.
Baker contends the additional $40,000 payment should also be considered earnest money and that the portion of it exceeding five percent of the purchase price should be refunded. Baker is incorrect for two reasons. First, the addendum, drafted by Baker, expressly made the $40,000 payment "nonrefundable." Clerk's Papers at 52. We cannot ignore this unambiguous expression of the parties' intent.
Second, the payment does not meet the statutory definition of earnest money:
"Earnest money deposit" means any deposit, deposits, payment, or payments of a part of the purchase price for the property, made in the form of cash, check, promissory note, or other things of value for the purpose of binding the purchaser to the agreement and identified in the agreement as an earnest money deposit, and does not include other deposits or payments made by the purchaser.
RCW 64.04.005(2)(a) (emphasis added). Unlike the $10,000 payment, which is clearly identified as earnest money in both the printed portion of the contract and in the handwritten addendum, the $40,000 is nowhere designated as earnest money.
Paragraph 6 of the purchase and sale agreement requires the parties to write in the amount of earnest money and the form in which it would be presented (in this case, the contract states that $10,000 would be paid by cashier's check). Paragraph 1 of the addendum states, "Buyer agrees to pay $10,000 earnest money. . . ." Clerk's Papers at 52.
We likewise reject Baker's alternative argument that the $50,000 constitutes liquidated damages under RCW 64.04.005(2)(b). The statute requires liquidated damages to be identified in the agreement. Because no payments are so designated, the statute does not apply.
We need look no further than the agreement's express terms to conclude the earnest money forfeiture provision does not apply to the $40,000 payment. We therefore affirm the trial court's order granting the Hesleps summary judgment.
We note, however, that undisputed evidence lends considerable support to this conclusion. First, the Hesleps rejected Baker's initial offer, which lacked nonrefundable payments. Baker's broker, Robert Stull, testified that Baker made all initial deposits nonrefundable and immediately paid to the seller in his second offer because "he needed a way to encourage the Hesleps to sign such an offer that would allow him early possession." Clerk's Papers at 92. Indeed, Gina Heslep testified she and her husband "would not have accepted Mr. Baker's offer and let him occupy this premises before even acquiring the property but for the fact that he paid us $50,000.000 nonrefundable, unconditional funds." Clerk's Papers at 70-71.
Pursuant to the purchase and sale agreement and RAP 18.1, the Hesleps are entitled to reasonable attorney fees and costs.