Opinion
No. 61331-6-I.
April 20, 2009.
Appeal from a judgment of the Superior Court for Snohomish County, No. 06-2-07822-3, Ellen J. Fair, J., entered February 21, 2008.
Affirmed by unpublished opinion per Leach, J., concurred in by Dwyer, A.C.J., and Cox, J.
UNPUBLISHED OPINION
Mark Komen appeals from an order granting summary judgment dismissal of his breach of contract claims and from a judgment entered against him after trial on his alternative claims of conversion, unjust enrichment, or failure to repay a demand loan. We affirm.
Background
In 1999, Mark Komen, Ronald Carr, and John DeNike formed Broken Group LLC to operate a car dealership in Oak Harbor. Under the Broken Group operating agreement, Komen initially owned 85 percent of Broken Group and had a 50 percent vote in management decisions. Carr and DeNike each owned a five percent interest in Broken Group and each had a 25 percent vote in management decisions. In 2000, Jerald McCann was added as a member to Broken Group, but Komen refused to sign a new limited liability company (LLC) agreement recognizing McCann's membership because he "didn't think it was necessary."
A fourth member, Jerry McMillan, also owned five percent of Broken Group but was not a managing member.
On September 8, 2004, Carr, DeNike, and McCann formed and signed an operating agreement for a new LLC called Mariner Auto LLC, for the purpose of operating a Mazda dealership in Everett. When Komen found out about the new LLC, he wanted to become a member. On September 17, 2004, Komen met with Carr, DeNike, and McCann, and their attorney, Richard Beresford, to discuss Komen's possible membership in Mariner Auto and to address issues regarding the operation of Broken Group. At that meeting, the four men reached a preliminary agreement, which Beresford memorialized in a handwritten note titled "KOMEN NONBINDING PROPOSAL." The handwritten note was initialed by Komen, Carr, DeNike, and McCann. On September 22, 2004, Beresford emailed Komen's attorney, Edward Spring. Attached to this e-mail was a memo outlining terms the Mariner Auto members wanted to include in any agreement adding Komen to Mariner Auto. Paragraph 3(h) of the proposal stated, "A written agreement regarding all of these matters including an operating agreement, promissory note, etc., must be executed on or before September 30, 2004." In the body of the e-mail Beresford wrote,
As I stated over the phone (this is the last time I will bore you with this condition), nothing contained in our negotiations should be construed to imply an agreement to include Mark Komen in Mariner Auto, LLC unless and until a final LLC agreement is sign [sic] by all four. Despite this conditional approach, I look forward to working with you in a positive way to promptly reach a final agreement.
Komen did not agree with some of the terms proposed in Beresford's memo, including the proposal that a final LLC agreement would be required before any agreement would be binding and that such an agreement must be executed on or before September 30, 2004.
On September 30, Spring responded by letter to Beresford's proposal. Spring's letter proposed changes to several items addressed in the September 22 memo from Beresford and made additional proposals. Spring specifically stated that the September 30 timetable did not seem reasonable and expressed a willingness to discuss a new timetable. In paragraph 6, Spring wrote:
As for the timing in paragraph 3(h), that does not appear to be a reasonable timetable. Maybe now that I'm involved, we can discuss a new timetable when we discuss the rest of this letter.
After speaking with Beresford by telephone, Spring e-mailed Komen and indicated that paragraph 6 of his letter to Beresford was "no longer applicable." This paragraph referred only to the timing of completing an LLC agreement and not to the requirement that an LLC agreement be signed.
On October 13, Beresford sent Spring a draft agreement regarding several issues, including loans to Broken Group, sale of Broken Group's dealerships, distribution of profits from Broken Group, membership and capitalization of Mariner Auto, and loans to Mariner Auto. The proposed agreement provided that, upon its execution, "the parties hereto shall also execute a Limited Liability Company Agreement in the form attached hereto marked Exhibit E." The proposed agreement provided for equal 25 percent membership by Komen, Carr, DeNike, and McCann.
On October 15, Spring wrote to Beresford to report that Komen had many objections to the proposed agreement and the parties were "still far apart on many key issues." This letter contained 10 bullet points modifying the terms of the proposed agreement. In addition, the letter stated, "If the following can be resolved promptly, Mark will loan the Broken Group ("BG") $100,000 next Tuesday, even if all of the documentation is not resolved or signed." One of the bullet points stated, "Your three clients will be the managers of MA, LLC. The agreement will spell out broad manager authority and Mark will have no vote in any of those matters."
On October 19, Carr sent Komen a fax containing a version of nine of the bullet points in Spring's October 15 letter with handwritten notations, including a note stating, "Just a few thoughts and concerns. We are getting very close! Lets [sic] get done so we all can get back to the dealerships. . . ." The same day, DeNike sent Komen a handwritten fax that stated, "I want very much to resolve our problems and go forward with our agreement that's currently almost hammered out. We're so close."
On October 21, 2004, Spring faxed a letter to Beresford and to Komen describing Komen's revisions to the proposed agreement. The letter did not address all of the terms that were in the proposed agreement but identified a number of specific issues.
Komen faxed the letter to Carr's residence; Carr, DeNike, and McCann all were at Carr's residence. The parties exchanged several versions of this letter by fax between 1:55 p.m. and 5:37 p.m., handwriting their changes and initialing provisions with which they agreed. The four men signed a version exchanged at 3:50 p.m. This is the version Komen is asking the court to enforce. Spring then incorporated the handwritten changes and sent out a fully typed version at 4:48 p.m. Komen wrote at the bottom, "I agree with all provisions," and initialed it. The other three signed below Komen's initials and the last faxed versions were sent that day at approximately 5:10 p.m. and 5:37 p.m.
Komen wired $40,000 to the bank account of Mariner Auto on October 28, 2004, and another $40,000 on October 29, 2004. McCann learned of the first $40,000 deposit on October 28 and transferred $40,000 to Broken Group the next day because Komen was a member of Broken Group and not of Mariner Auto. At that time, he did not know that Komen had made a second $40,000 deposit on October 29. Mariner Auto transferred $40,000 to Broken Group by check on December 1, 2004.
On November 4, 2004, Beresford received an e-mail from Spring's office stating,
Ed called from out of town and dictated the following message, and asked me to send you the attached arbitration language. He said that it is probably better for an agreement that has already been finished but it would probably work with some minor modifications to select an arbitrator to actually write provisions of the agreement where the parties can't reach a mutually acceptable understanding.
On November 9, 2004, Beresford sent Spring an e-mail informing him that he had notified Mazda of "the 3 member's [sic] intent to allow Mark to buy in" to Mariner Auto. On December 21, 2004, Komen sent an e-mail to Carr, which began, "Still waiting for you to provide instructions for investing in Mariner Auto as you said a couple weeks ago that you would do. The funds are arranged and can be wired into the new account with short notice . . . just need to know the amount."
On January 11, 2005, Komen's attorney wrote to Beresford, stating, "No progress has been made on the Members' agreement and Mark has been precluded from any interest in MA, contrary to the agreement between the parties." As of February 8, 2005, Komen knew that Mariner Auto's transfer of $80,000 to Broken Group was intended as a return to him of the $80,000 he transferred to Mariner Auto. Komen was authorized to draw checks on the Broken Group account and he occasionally did so for personal reasons, but never attempted to retrieve the $80,000 from Broken Group. In a March 4, 2005, letter from his attorney, Komen recognized that Mariner Auto attempted to return his money: "Mariner Auto's refusal to accept his funds constituted a breach, excusing Mark's further contributions." His complaint also admits that Mariner Auto and its members "declined to accept" his $80,000 and instead transferred it to Broken Group.
Komen filed suit against Carr, DeNike, and McCann on April 18, 2006, asking for specific performance of the alleged contract making him a member of Mariner Auto. Komen amended the complaint on August 7, 2007, adding Mariner Auto as a defendant and the request for alternative relief in the form of damages for conversion or repayment of the $80,000 he paid to Mariner Auto. The trial court dismissed the breach of contract claim on summary judgment because the undisputed evidence established that the parties had not reached an agreement. A bench trial was held on alternative claims of conversion, unjust enrichment, or failure to repay a demand loan. The trial court entered judgment in favor of respondents. Komen appeals.
Discussion
A. Summary Judgment
Komen argues that the trial court erred in granting summary judgment to respondents because issues of material fact remain regarding whether the parties intended to be bound by the October 21, 2004, letter without later agreement on unresolved issues. However, the undisputed evidence shows that there was no meeting of the minds between Komen and respondents and that respondents had manifested an intention not to be bound until a final LLC agreement was signed. We therefore hold that summary judgment was proper.
We review an order granting summary judgment de novo, engaging in the same inquiry as the trial court, considering all facts in the record and reasonable inferences in a light most favorable to the nonmoving party. Summary judgment is appropriate if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law.
Wilson Court Ltd. P'ship v. Tony Maroni's, Inc., 134 Wn.2d 692, 698, 952 P.2d 590 (1998).
Wilson, 134 Wn.2d at 698.
In determining whether there was mutual assent by the parties to be bound by a contract, Washington courts look to the objective acts or manifestations of the parties rather than the unexpressed subjective intent of any party. Mutual assent requires that parties manifest to each other their mutual assent to the same bargain at the same time and generally takes the form of an offer and an acceptance. Furthermore, agreements to agree are unenforceable in Washington. "An agreement to agree is `an agreement to do something which requires a further meeting of the minds of the parties and without which it would not be complete.'"
Wilson, 134 Wn.2d at 699.
Yakima County (W. Valley) Fire Prot. Dist. No. 12 v. City of Yakima, 122 Wn.2d 371, 388, 858 P.2d 245 (1993).
Keystone Land Dev. Co. v. Xerox Corp., 152 Wn.2d 171, 176, 94 P.3d 945 (2004).
Keystone, 152 Wn.2d at 175 (quoting Sandeman v. Sayres, 50 Wn.2d 539, 541-42, 314 P.2d 428 (1957)).
The lack of mutual assent in this case is partially attributable to respondents' manifestation of their intention not to be bound until a final LLC agreement was signed by the parties. Our Supreme Court has stated that "`if an intention is manifested in any way that legal obligations between the parties shall be deferred until the writing is made, the preliminary negotiations and agreements do not constitute a contract.'" In determining whether informal writings are sufficient to establish a contract even though the parties contemplate signing a more formal written agreement, courts consider whether the subject matter has been agreed upon, the terms are all stated in the informal writings, and the parties intended a binding agreement prior to the time of the signing and delivery of a formal contract.
KVI, Inc. v. Doernbecher, 24 Wn.2d 943, 967, 167 P.2d 1002 (1946) (quoting Restatement of the Law of Contracts § 26 cmt. a (1932)).
Morris v. Maks, 69 Wn. App. 865, 869, 850 P.2d 1357 (1993).
The absence of mutual assent is evident in the objective manifestations of the parties before, on, and after October 21, 2004. In other words, the parties never manifested assent to be bound by the same bargain at the same time. On the contrary, respondents manifested a clear intention not to be bound until a final LLC agreement was signed, and this condition was never removed. On September 22, respondents' attorney, Richard Beresford, communicated to Komen's attorney that his clients did not intend to be bound by any terms negotiated by the parties "unless and until a final LLC agreement is sign [sic] by all four." Because respondents expressly manifested the intent that any legal obligations would be deferred until the LLC agreement was made, their preliminary negotiations and agreements — including the October 21 letter — do not constitute a contract.
Komen argues that the condition was removed during negotiations between his attorney, Edward Spring, and respondents' attorney, Richard Beresford. To support this argument, Komen refers to communications between Spring and Beresford on September 30, 2004, and between Spring and Komen on October 13, 2004. On September 30, Spring wrote to Beresford to discuss terms proposed by respondents in an earlier e-mail from Beresford. Referring to a term creating a September 30 deadline for a signed LLC agreement, Spring suggested that "the timing in paragraph 3(h) . . . does not appear to be a reasonable timetable." (Emphasis added.) After talking to Beresford by telephone, Spring wrote to Komen, informing him that the timing — that is, the September 30 deadline — was no longer applicable. There is no evidence in the record showing that requirement of a signed LLC agreement was "no longer applicable" as Komen argues. Furthermore, the objective manifestations of the parties after the October 13 e-mail show that the condition was still in effect. On October 15, Beresford sent Spring a new proposed agreement, which provided, "the parties hereto shall also execute a Limited Liability Company Agreement in the form attached hereto marked Exhibit E."
In light of respondents' condition that no agreement would be binding until a final LLC agreement was signed, none of Komen's arguments raise a question of fact precluding summary judgment. For example, Komen argues that the parties intended to be bound by the October 21 letter because they signed it. However, this does not raise a question of fact regarding an enforceable contract because the letter was part of an ongoing negotiation regarding Komen's possible membership and was no more than an "agreement to agree." The letter clearly contemplated a further meeting of the minds when it stated, "Your three clients will be the managers of MA, LLC. The agreement will spell out broad manager authority and Mark will have no vote in any of those matters." Furthermore, several material terms were notably absent from the October 21 letter, including the ownership interests of the LLC members. Finally, although Komen argues that the October 21 letter did not require execution of a separate operating agreement, in his deposition he admitted that the October 21 letter was not an LLC agreement or a final operating agreement.
Komen argues that the requirement of a final LLC agreement was not a condition because he did not agree to it. However, this argument merely underscores the fact that there was no mutual assent by all parties. He also argues that the parties intended to be bound because they did not expressly write "nonbinding" on the October 21 letters or discuss the requirement of a formal operating agreement that day. However, when Beresford communicated the condition of a signed LLC agreement he stated, "[T]his is the last time I will bore you with this condition." Thus, the absence of further repetitions of the condition during the parties' negotiations does not raise a question of fact.
Next, Komen points to communications from respondents on October 19 expressing the belief that they were "very close" to coming to agreement. However, these comments show only that the parties believed they were "close" to agreement, not that they had reached any agreement. Furthermore, as discussed above, the October 21 letter was merely an agreement to agree, not a complete and final agreement. Thus, even though it was signed by the parties, their signatures did not indicate an intention to be bound by the preliminary agreement, in light of respondents' earlier manifestation that a final LLC agreement was required before they would be bound.
Komen argues that respondents were "desperate to have Mr. Komen loan $100,000 to Broken Group, and Mr. Komen agreed to advance the money only if the [respondents] would sign a written agreement governing his admission to Mariner Auto that did not address or require later execution of a new operating agreement." This is apparently in reference to a letter from his attorney which stated, "If the following can be resolved promptly, Mark will loan the Broken Group ("BG") $100,000 next Tuesday, even if all of the documentation is not resolved or signed." Thus, the letter expressly stated that the loan was not conditioned on a final written agreement. Furthermore, it is irrelevant whether Komen waited to loan the money until he subjectively believed that an agreement had been reached, where the objective manifestations of the parties show that there was no mutual assent.
Finally, Komen argues that no one told him or his attorney that the agreement was unenforceable due to the lack of an operating agreement. However, several objective manifestations by Komen and his attorney show that they understood that a final agreement was needed before Komen could become a member of Mariner Auto. For example, on November 4, 2004, Komen's attorney proposed the parties hire an arbitrator to help them reach a final agreement. On December 21, 2004, he requested instructions for investing in Mariner Auto. And on January 11, 2005, Komen's attorney wrote to respondents' attorney, complaining that no progress had been made on the agreement.
Based on the undisputed facts in this case, no reasonable trier of fact could conclude that the parties mutually intended to be bound by the October 21 letters. Therefore, we affirm the trial court's order granting summary judgment to respondents.
B. Bench Trial
Komen argues that the trial court erred when it found against him on his claims for unjust enrichment, conversion, and failure to repay a demand loan. After a bench trial, the trial court entered findings of fact and conclusions of law regarding Komen's claims.
Appellate review of a trial court's findings following a bench trial is limited to determining whether substantial evidence supports its findings of fact and whether the findings support its conclusions of law. Substantial evidence exists when there is a sufficient quantity of evidence to persuade a fair-minded, reasonable person that a finding is true. We view the evidence in the light most favorable to the prevailing party and defer to the trial court's judgment regarding witness credibility and conflicting testimony.
Hegwine v. Longview Fibre Co., Inc., 132 Wn. App. 546, 555, 132 P.3d 789 (2006).
Hegwine, 132 Wn. App. at 555-56.
Hegwine, 132 Wn. App. at 556.
Komen argues that the trial court erred in making findings of fact 9 and 22 because these findings related to issues that were resolved by the order granting summary judgment. We disagree.
Finding of fact 9 describes Komen's subjective belief that the October 21 letter was to take immediate effect and the subjective belief held by McCann, Carr, and DeNike that the letter would be binding only after a separate LLC agreement was signed. Finding of fact 22 states in part that Komen "mistakenly believed he had a right to deposit $80,000 into the bank account of Mariner Auto, LLC, but knew at that time that he was not yet a member of Mariner Auto, LLC." Contrary to Komen's argument, neither finding of fact 9 nor 22 was resolved by the order granting summary judgment. Both of these findings address subjective beliefs held by the parties, which were not at issue in determining whether there was a genuine issue of material fact regarding intent to form a contract. The record contains sufficient evidence to support findings 9 and 22.
Komen also challenges finding of fact 13:
Michael Hopkins [Mariner Auto's accountant] testified he took phone calls from both Adrianna Wadley [Mariner Auto's bookkeeper] and Jerry McCann regarding the plaintiff's deposit of $80,000 into the bank account of Mariner Auto, LLC. Upon Michael Hopkins verifying that plaintiff was not a member of Mariner Auto, LLC, he advised Jerry McCann to transfer to Broken Group the $80,000 deposited by Mark Komen with Mariner Auto.
He argues that this finding is not supported by the record because Hopkins was never informed of the written agreement to admit Komen as a member of Mariner Auto and thus never verified whether Komen was a member of Mariner Auto. Hopkins testified that McCann told him that Komen was not a member of Mariner Auto and that he reviewed Mariner Auto's LLC agreement and verified that Komen was not listed as a member. The record therefore supports finding of fact 13.
Komen challenges the trial court's conclusions of law holding that his claims for unjust enrichment, conversion, and failure to repay a demand loan fail. However, these conclusions are supported by the trial court's findings of fact. The trial court found that Mariner Auto returned the money to Komen by transferring it to the Broken Group account and that Komen had access to the money in the Broken Group account. We affirm.
Affirmed.
WE CONCUR: