Opinion
No. 62697-3-I.
September 14, 2009.
Appeal from the Superior Court, King County, No. 06-2-24383-8, Susan J. Craighead, J., entered October 3, 2008.
Affirmed by unpublished opinion per Leach, J., concurred in by Becker and Lau, JJ.
Bernice Lee appeals a trial court decision enforcing an oral contract providing for conveyance of title to a church to Turning Point Community Church of God in Christ. Lee challenges the court's use of detrimental reliance as a consideration to take the contract outside the statute of frauds, the sufficiency of the evidence, and the availability of the remedy of specific performance. Because the trial court did not substitute detrimental reliance for the three recognized factors showing part performance, sufficient evidence supports its findings on these factors, and the remedy selected was appropriate, we affirm.
FACTS
In 1999, Lee was a member of the Macedonia Church of God in Christ (Macedonia), a small unincorporated congregation led by Pastor Marion Tucker. Macedonia conducted its services in a converted storefront that it rented for $900 a month. Macedonia and Lee were aware that Macedonia might have to vacate the storefront.
In June 1999, Lee signed a purchase and sale agreement to buy a church (parcel A) and an adjoining vacant lot (parcel B) from Reverend Moore of the Prince of Peace Church for $300,000. The property was subject to a prior option agreement and could not be immediately sold. In the interim, Lee and Pastor Tucker had various conversations which led Pastor Tucker to believe that Lee would purchase the properties with the congregation's help, that the congregation would make the monthly payments to Reverend Moore and pay Lee back, and that eventually the congregation would own the church and adjoining lot. Pastor Tucker acted as the congregation's agent.
The sale closed in October 2000. Lee, Reverend Moore, Pastor Tucker, and Harold Craft, Lee's real estate agent, met in an attorney's office for matters related to closing the sale. Pastor Tucker understood the terms of the oral agreement to be as follows: (a) a purchase price of $250,000 for parcel A and $50,000 for parcel B, (b) a down payment of $100,000 for both parcels, $90,000 to be paid by Lee and $10,000 to be paid by the congregation, (c) the congregation to make $1,500 monthly payments commencing December 15, 2000, for parcel A and $100 per month for parcel B, (d) the congregation to make two $25,000 balloon payments, one on October 15, 2001, and the second on October 15, 2002. Pastor Tucker understood that the congregation would have to make a final payment at the end of the three-year contract but never calculated the amount needed to do so. This was significant because the final payoff amount would have been approximately $46,000, a sum Pastor Tucker could not have reasonably believed the congregation would have. Pastor Tucker also understood that the congregation would have to repay Lee the amount she contributed to the down payment. Reverend Moore carried the sale contract. The evidence showed that Lee provided $92,000 for the down payment and Macedonia provided $8,053. Lee took title to the property. Craft testified that Lee told him Macedonia would be renting the property.
Pastor Tucker had a different understanding. He believed that Lee had promised to convey title if the congregation would make the monthly payments, contribute 10 percent to the down payment, make the balloon payments, and repay the money Lee advanced for the down payment. There was no length of time set for repayment of Lee's contribution, and the repayment was not to begin until after Reverend Moore was fully paid.
The congregation took possession of the properties in October 2000. The congregation thereafter approved a name change from Macedonia to Turning Point Community Church of God in Christ. Although there was some difference in the membership, Macedonia and Turning Point were essentially the same congregation. Turning Point incorporated on September 24, 2001. Turning Point used the properties continuously as a church, school, and parking lot.
Turning Point raised money through tithing and donations. It also had a building fund dedicated to paying for the properties, which was started when the congregation was known as Macedonia. Turning Point made regular monthly payments of $1,500 directly to Reverend Moore until 2004 and subsequently to Lee, or others she designated, until May 2006. Turning Point made total monthly payments of $76,500. Turning Point made two balloon payments totaling $45,000 and paid taxes on parcel B before its sale in 2004. As explained below, it paid taxes on parcel A beginning in November 2004. It also loaned Lee approximately $22,240.00 and made a payment on her behalf of $3,277.48. In total, Turning Point paid $155,020.48 toward the purchase of the properties. Turning Point also paid for insurance, repairs, and some improvements. Lee contributed $92,000 for the down payment and made one balloon payment of $25,000. The remaining contract amount was paid from proceeds from the sale of parcel B, described below. Lee's total contribution to the purchase price of the properties was $142,587.
The tax statements for parcel A were sent directly to Lee. In the spring of 2004, Lee and Turning Point became aware that property taxes had not been paid on parcel A for four years. When Lee raised the issue with Pastor Tucker, he presented her with a quitclaim deed conveying the property to Turning Point, which, he said, would make the property tax exempt. Lee did not sign the deed and began complaining to others in the congregation that Turning Point was trying to take her property. In November 2004, over Pastor Tucker's objection, Lee sold parcel B for $200,000. The proceeds were distributed as follows: $65,967 for the balance of the purchase contract on parcel B, $14,000 for the balance of the purchase contract on parcel A, $11,587 for real estate taxes, $77,988 to Lee, and the remainder to closing costs.
The allocation of the proceeds from parcel B is not in dispute.
On June 20, 2006, Lee posted a "Notice of Termination" on Turning Point's front door. On July 28, 2006, Turning Point filed a complaint to confirm ownership of real property and for an accounting. Turning Point asserted causes of action for breach of contract, resulting trust, and constructive trust. Lee answered, counterclaimed, and asserted claims against Pastor Tucker personally. Lee asserted causes of action for slander of title, infliction of emotional distress, trespass, conversion, fraud, and unlawful retainer. Pastor Tucker answered. The matter went to trial in March 2008.
Prior to trial, Lee took a voluntary nonsuit on the claims for slander of title, infliction of emotional distress, conversion, and fraud.
The trial court found that the parties entered an oral contract by which Turning Point would eventually obtain title to the property. It found that Lee was generally not credible and specifically that she was not credible on her claim that she rented the property to Turning Point. It also found that this oral contract was taken from the statute of frauds by part performance and that the proper remedy was specific performance and a constructive trust. The court quieted title in Turning Point, imposed a lien in Lee's favor for $237,500, half the agreed value of parcel A, and directed the parties to propose how the lien would be satisfied. It also dismissed the claims against Pastor Tucker. Lee appeals.
Lee has not appealed dismissal of her claims against Pastor Tucker.
DECISION
The court correctly considered this suit as an equitable matter. Under the proper conditions, equity assumes jurisdiction for all purposes and allows the court to fashion such relief as may be required. Lee does not challenge the trial court's finding that the parties entered into an oral contract. We therefore consider that finding a verity and examine whether the oral contract was taken out of the statute of frauds and whether the trial court imposed a permissible remedy. We give deference to the trial court's factual determinations but review its grant of equitable relief de novo. Turning Point does not challenge the award of a lien for $237,500 to Lee or the allocation of the proceeds from the sale of parcel B. We therefore also do not consider the propriety of this part of the trial court's remedy.
Mendez v. Palm Harbor Homes, Inc., 111 Wn. App. 446, 460, 45 P.3d 594 (2002).
Niemann v. Vaughn Cmty. Church, 154 Wn.2d 365, 375, 113 P.3d 463 (2005).
Issue 1: Lee first contends the trial court erred in finding that the oral contract between Lee and Turning Point was taken outside the statute of frauds by part performance. She argues that the court improperly substituted detrimental reliance for the requirement that Turning Point make substantial and permanent improvements. She further argues that even if detrimental reliance is an appropriate consideration, Turning Point failed to establish its case by clear, convincing, and unequivocal evidence. She also contends that the evidence is not sufficiently persuasive to find that the church gave consideration.
Lee contends the evidence taking the oral contract out of the statute of frauds must be "clear, cogent, convincing and unequivocal". But the cases she cites hold that an elevated standard of proof applies to evidence proving the terms of the contract to be specifically enforced. The cases do not hold that this standard also applies to evidence proving part performance. We therefore review the trial court's findings of fact under a substantial evidence standard and review questions of law de novo. We do not review credibility determinations.
Pardee v. Jolly, 163 Wn.2d 558, 566, 182 P.3d 967 (2008).
Miller v. McCamish, 78 Wn.2d 821, 831, 479 P.2d 919 (1971).
The oral contract in this case involves the transfer of an interest in real property and therefore falls within the real property statute of frauds, RCW 64.04.010. "Part performance removes a contract from the statute of frauds if a party is able to show: `(1) delivery and assumption of actual and exclusive possession; (2) payment or tender of consideration; and (3) the making of permanent, substantial and valuable improvements, referable to the contract.'" Usually, two of the three factors are present when a court finds sufficient part performance, although this is not an absolute rule. The part performance doctrine is based on the premise that in certain situations, it would be fraudulent to allow a party to escape the performance of her duties under an oral contract after permitting the other party to perform in reliance on the contract.
RCW 64.04.010 provides that every conveyance of real estate or interest therein be by deed. The contract also falls within the statute of frauds under RCW 19.36.010, which provides that a contract not to be performed in one year is void if not in writing. See Powers v. Hastings, 93 Wn.2d 709, 711 n. 1, 612 P.2d 371 (1980).
Pardee, 163 Wn.2d at 567 (quoting Powers, 93 Wn.2d at 717).
Berg v. Ting, 125 Wn.2d 544, 558, 886 P.2d 564 (1995).
Berg, 125 Wn.2d at 556.
The evidence that Turning Point believed it was purchasing the properties and that it partly performed its obligation was strong. It took possession of the properties and used them exclusively for an extended period of time. It made part of the down payment, made the payments required by the contract with Reverend Moore, made one balloon payment and part of another, and paid funds to Lee, or on her account, after the property was paid for. It organized fund raising activities for the purpose of paying for the properties and set aside monies in a building fund. When the mortgage was paid off, it held a ceremonial mortgage burning and publicly thanked Lee for assisting the congregation in making the purchase. While the church did not make valuable and substantial improvements to the property, it did pay for repairs and some improvements. Under the facts of this case, the failure to invest more in improvements does not undercut the strength of the other evidence supporting part performance because there is no evidence that any substantial improvements were necessary. The evidence showed that one of the reasons that this arrangement was attractive was because church properties rarely come on the market and this property was already configured for use as a church. Turning Point would not have acted as it did without a view to purchasing the properties. The evidence showed the existence of at least two of the three requirements for part performance sufficient to take the oral contract out of the statute of frauds.
The trial court did view detrimental reliance as a factor to be considered. Berg rejected the idea that detrimental reliance alone could substitute for the three factors showing part performance. But Berg did not hold that detrimental reliance could not be considered. While the trial court viewed detrimental reliance as a substitute for making substantial improvements, it did not base its decision on detrimental reliance alone or substitute it for the three factors. Because there were at least two factors shown, we do not view the trial court's use of detrimental reliance as error because there is nothing forbidding its consideration in an appropriate case.
Lee's argument that Turning Point did not pay consideration is not persuasive. Turning Point contributed part of the down payment, paid one balloon payment, and paid part of the final payment. Even under Lee's view that the monthly payments were actually rent, rather than consideration, the other payments cannot be considered in any other light.
The evidence clearly supports the trial court's determination that specific performance took this oral contract out of the statute of frauds.
Issue 2: Lee next contends that the trail court erred in ordering her to transfer title to Turning Point. She argues that the contract was too imprecise to be specifically enforced, that the congregation failed to perform, and that specific performance is not available when there is an adequate remedy at law.
An action for specific performance is the sort of equitable proceeding in which the trial court may grant whatever relief the facts warrant. Some agreements may be certain enough to constitute a contract but be too indefinite to be specifically enforced. When a party seeks specific performance, rather than damages, there must be "`clear and unequivocal'" evidence that "`leaves no doubt as to the terms, character, and existence of the contract.'" But absolute certainty is not required, and it is sufficient if the court can determine the contract with reasonable certainty. Lee contends that specific performance of this oral contract is not available because the terms under which she was to be repaid are missing.
Kreger v. Hall, 70 Wn.2d 1002, 1007-08, 425 P.2d 638 (1967).
Powers, 93 Wn.2d at 716.
Miller, 78 Wn.2d at 829 (quoting Granquist v. McKean, 29 Wn.2d 440, 445, 187 P.2d 623 (1947)); Paradiso v. Drake, 135 Wn. App. 329, 335, 143 P.3d 859 (2006).
Luther v. Nat'l Bank of Commerce, 2 Wn.2d 470, 478, 98 P.2d 667 (1940).
In its oral ruling, the trial court acknowledged that the parties did not set out how long the congregation would have to pay Lee back. The court characterized this part of the agreement as much like a family loan that blurred the line between a gift and a loan. The evidence is consistent with this observation. The congregation made payments to Lee and loaned her money that it did not seek to have repaid. Although it objected to her sale of parcel B, it did not formally contest the distribution of the proceeds. Even after the mortgage was paid, the congregation continued to send Lee money and always acknowledged that she was entitled to be repaid for her contributions. Neither Turning Point nor Lee seemed to be concerned as to how long the process might take, and both seemed unconcerned with how much money Lee had actually contributed. The contract merely required payments until Lee was repaid.
In fashioning a remedy, the court directed that Lee transfer title but recognized that a monthly payment plan was not workable. It allowed the parties to propose how Lee would be paid, whether from the church obtaining a loan, or sale of the property, or some other means. Essentially, however, the court directed that Lee be paid in cash. Even though the contract did not contain any terms of repayment, one of the permissible options would be to pay Lee all the amounts owing. No provision in the oral contract forbids such a payment and this is essentially the relief ordered by the trial court. Because a cash payment is an alternative permitted under the contract, the court acted within its discretion in directing specific performance on condition that the church satisfy its obligation by paying Lee's lien.
Hubbell v. Ward, 40 Wn.2d 779, 787-88, 246 P.2d 468 (1952).
Lee further contends that Turning Point failed to perform its part of the contract. But the court directed Turning Point to satisfy Lee's lien, and this act would fulfill its duty under the contract.
Lee finally argues that damages, rather than specific performance, would provide an adequate remedy. In determining whether damages constitute adequate compensation, one of the factors the court considers is the difficulty of procuring a suitable substitute. The evidence in this case supports the trial court's determination that the only adequate remedy for Turning Point's efforts, payments, and use of the church over a six-year period, was to transfer title to it. There is no evidence of a suitable substitute that would make damages an adequate remedy. When a court's legal powers cannot adequately compensate a party's loss with money damages, it may use its broad equitable powers to compel specific performance. We agree that damages, under all the circumstances, would not have been adequate.
Crafts v. Pitts, 161 Wn.2d 16, 24, 162 P.3d 382 (2007).
Crafts, 161 Wn.2d at 23-24.
Issue 3: Lee next asserts that the trial court erred in imposing a constructive trust because there was no wrongdoing on her part.
A constructive trust may be imposed when a person holding title is under an equitable duty to convey it to another. While there must generally be some element of wrongdoing, equity's need for flexibility requires that wrongdoing not be limited to fraud, misrepresentation, or bad faith, which usually form the basis for the imposition of a constructive trust. The court found that unless Lee was actively misleading the congregation for years, the only explanation for her behavior was that she changed her mind. Changing her mind after allowing the congregation to act as it did over a six-year period, while not "wrongdoing" in the traditional sense, is a sufficient basis for imposing a constructive trust.
Baker v. Leonard, 120 Wn.2d 538, 547-48, 843 P.2d 1050 (1993).
Baker, 120 Wn.2d at 548.
Issue 4: Lee challenges the trial court's determination regarding the parties' respective contributions to the purchase price of the property. She argues that it was error to credit Turning Point with all payments it made to Reverend Moore without deducting the rental value of the property and that she should have been credited with interest on the $92,000 she made as a down payment.
But the oral contract found by the court was that the congregation would make the monthly contract payments and pay Lee back for her contributions. Nothing in this contract provides for payments of rent or interest on Lee's contributions. The court's findings regarding contributions are entirely consistent with its findings regarding the oral contract.
Lee was not without recompense for the use of her money. She retained the excess proceeds from the sale of parcel B and received a lien on the property. The total she is to receive under the court's remedy of this dispute exceeds $330,000, more than double her contribution.
Issue 5: Lee contends that Turning Point was not the real party in interest because the oral contract was between her and Macedonia, the contract was not specifically adopted by Turning Point, and the members of the unincorporated Macedonia congregation were not the same as the members of the later incorporated Turning Point congregation.
The trial court found that Turning Point included substantially the same congregants as did Macedonia, that the vast majority of the contributions that went to pay for the property were made by Turning Point after it was incorporated, and that Turning Point's actions demonstrated that it considered itself bound by the agreement. It also found that Pastor Tucker acted as the agent for both Macedonia and Turning Point.
A party ratifies a contract if, after discovery of facts that would warrant rescission, that party remains silent or continues to accept benefits under the contract. In this case, Lee continued to accept payments from Turning Point, and Turning Point continued its occupancy and use of the church properties. If there was any real question as to whether Macedonia or Turning Point was the proper party, it was answered when both Lee and Turning Point continued to rely on and accept the benefits of the contract. Specific performance may be granted to a successor when the successor has notice of the rights of another under a contract conveying an interest in land.
Hooper v. Yakima County, 79 Wn. App. 770, 775-76, 904 P.2d 1193 (1995), overruled on other grounds by Del Rosario v. Del Rosario, 152 Wn.2d 375, 97 P.3d 11 (2004).
Berg, 125 Wn.2d at 555.
Issue 6: Lee finally contends that the trial court erred in finding that neither she nor Turning Point had adequate resources to purchase the property without the assistance of the other. She argues that she would not have had difficulty renting the property for at least what Turning Point paid.
Lee's tax returns showed that she was a woman of modest income, with an adjusted gross income in 2000 of less than $32,000, a taxable income of $311, and losses on her rental properties. While she appears to have accumulated property interests, there was no evidence at trial showing the extent or liquidity of those interests. The evidence showed that the congregation made payments to Lee or on her behalf and loaned her money at various times. While her contribution of $92,000 to the down payment of $100,000 suggests she was close to being able to make the entire down payment herself, it does not show that she could have actually paid the additional $8,000 or so needed to close the sale or the later balloon payments due Reverend Moore. Moreover, the evidence did not establish that her monthly income was sufficient to make the payments on the sale contract. While Craft opined that the church would have commanded a rental of at least $1,500 in 2000, there was no evidence that there was a demand for such a building as a rental or that Lee could have actually rented the property for the monthly payments due to Reverend Moore together with taxes and other costs paid by Turning Point. There is sufficient evidence to support the trial court's finding.
For about six years, the parties operated on understanding and trust and seemed unconcerned with the lack of any written agreements or keeping accurate records. Resolving the ensuing dispute and fashioning an appropriate remedy presented difficulties probably unresolvable except by resort to the trial court's broad equitable powers. We recognize that the testimony was sometimes confused and conflicting and that the evidence was far from ideal but conclude that substantial evidence supports the trial court's factual determinations. We also recognize that there may not have been any ideal remedy but conclude that the one chosen by the trial court was appropriate.
Affirmed.
WE CONCUR: