Edward J. Eleazer And Maya E. Eleazer, Apps. v. Bush House L.l.c., Res.

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
EDWARD J. ELEAZER and MAYA
E. ELEAZER, husband and wife and DIVISION ONE , -n o
their marital community
No. 70513-0-1
Petitioners,
v. UNPUBLISHED OPINION
c3 ' •?•
BUSH HOUSE, LLC, a Washington
oo
limited liability company, its successor
and assigns; SNOHOMISH HEALTH
DISTRICT, a municipal corporation of
the State of Washington; and LOYAL
MARY NORDSTROM, an individual,
Respondents. FILED: August 25, 2014
Dwyer, J. — "It is unthinkable that courts should undertake the writing of
contracts for sellers and buyers who have failed or refused, rightly or wrongly, to
come to terms between themselves." Haire v. Patterson, 63 Wn.2d 282, 287,
386 P.2d 953 (1963). In this case, the trial court—failing to heed this directive-
transformed a general promise to grant a septic easement into a detailed
easement agreement, replete with terms that were never agreed upon by the
contracting parties. In so doing, the trial court erred.
Edward and Maya Eleazer entered into a residential real estate purchase
and sale agreement (REPSA) with Loyal Mary Nordstrom to purchase a single-
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family house. Included in the REPSA was a two sentence addendum in which
the Eleazers promised to grant an easement to the owner of the Bush House
property—an adjoining property, then owned by Nordstrom, on which was
located a hotel and restaurant. Although an easement was never granted, the
real estate transaction closed: the Eleazers tendered the purchase price to
Nordstrom and Nordstrom conveyed the house and real property to them.
Several years later, both Nordstrom and the subsequent purchasers of the
Bush House property—Bush House, LLC (BHLLC)—contacted the Eleazers,
seeking conveyance of a septic easement. No agreement was reached. The
Eleazers filed a quiet title action against BHLLC and the Snohomish Health
District (SHD). Nordstrom intervened as a defendant. Nordstrom then filed a
counterclaim, seeking specific performance of the Eleazers' obligations pursuant
to the addendum. The trial court ruled that the Eleazers had breached their
promise to grant a septic easement and, subsequently, imposed detailed
easement terms upon which the parties had never agreed.
On discretionary review, we are asked whether the addendum to the
REPSA was an unenforceable agreement to agree and whether it merged into
the statutory warranty deed. Although the easement provision did not merge into
the deed, we hold that the trial court erred in the manner in which it imposed
specific performance. Accordingly, we reverse and remand.
I
Prior to 2007, Nordstrom owned adjoining properties in Index,
Washington. On one property was a single-family house. On the other property
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No. 70513-0-1/3
was a hotel and restaurant known as the Bush House. In February 2007, the
Eleazers offered to buy the single-family house (hereinafter Eleazer property)
from Nordstrom and the parties entered into a REPSA. When they purchased
the property, the Eleazers knew that an on-site septic system (OSS) serving the
Bush House included a drain field that was located in their front yard. At the
insistence of Nordstrom's listing agent, the Eleazers included a Form 34
addendum to the REPSA, which stated: "Buyer agrees to grant access for
maintenance of OSS to Bush House B&B. Access to be granted in the form of a
recorded easement agreeable to both parties." (Emphasis added.)
Thereafter, Nordstrom conveyed title to the subject property to the
Eleazers by statutory warranty deed. The deed made no mention ofthe Form 34
addendum to the REPSA, and the Eleazers claimed that Nordstrom did not
contact them about an easement until October 2010—over three years after the
closing date.1 The deed did contain an express acknowledgment that the title
was marketable with specific exceptions, including easements not materially
affecting the value of or unduly interfering with the grantees' reasonable use of
the property.
GRANTOR ACKNOWLEDGES THAT TITLE TO THE PROPERTY
IS MARKETABLE AT THE TIME OF THIS CONVEYANCE. THE
FOLLOWING SHALL NOT CAUSE THE TITLE TO BE
UNMARKETABLE. RIGHTS, RESERVATIONS, COVENANTS,
CONDITIONS, AND RESTRICTIONS, PRESENTLY OF RECORD
AND GENERAL TO THE AREA, EASEMENTS AND
1 BHLLC contacted the Eleazers in 2010 and demanded that they grant an easement to
BHLLC by October 8, 2010. Subsequently, on October 21, Nordstrom wrote a letter to the
Eleazers in which she enclosed a prepared easement agreement and requested that the
Eleazers satisfy the promise made within the Form 34 addendum.
No. 70513-0-1/4
ENCROACHMENTS, NOT MATERIALLY AFFECTING THE
VALUE OF OR UNDULY INTERFERING WITH GRANTEE'S
REASONABLE USE OF THE PROPERTY, AND RESERVED OIL
AND/OR MINING RIGHTS.
(Emphasis added.)
In December 2011, Nordstrom sold the Bush House property to BHLLC.
In February 2012, the SHD denied the Eleazers' application requesting
permission to repair their septic system by connecting it to the OSS drain field—
located in the Eleazers' front yard—that serves the Bush House property. In its
letter denying the Eleazers' application, the SHD explained that Nordstrom had
filed a declaration of restrictive covenants in May 1993, which might have created
"some sort of cloud on the title" of the Eleazer property or granted dominant
control over the OSS and portions of the Eleazer property to the owner of the
Bush House property. The SHD declined to issue a septic repair permit to the
Eleazers because it was "not readily clear" who had the ownership control of the
OSS and the immediate area.
Back in March 1993, the SHD had approved the OSS serving the Bush
House property with certain conditions, including the following: "All components
of onsite sewage facility on separate tax lots from the Bush House Restaurant
must be tied to Bushhouse [sic] via recorded easements." To comply with the
SHD's letter requirement, Nordstrom recorded with the county auditor a copy of
the SHD letter of conditional approval and a declaration of restrictive covenants,
which covered both the Eleazer property and the Bush House property. The
restrictive covenants stated that they were to "run with said land" and bind the
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No. 70513-0-1/5
owners of the properties and all of their future grantees and successors. The
restrictive covenants also provided that they were enforceable by a municipal,
county, or quasi-judicial agency against the owners of the property or their
successors who violate or attempt to violate any of the covenants.
In April 2012, the Eleazers filed a quiet title action in Snohomish County
Superior Court against BHLLC and the SHD. The Eleazers claimed that when
they purchased their property in 2007, they were not aware of the existence of
either the restrictive covenants or the SHD's March 1993 letter to Nordstrom,
although both were recorded. The Eleazers requested an order declaring the
restrictive covenants and the March 1993 letter invalid and requiring the county
auditor to strike them. Nordstrom intervened in the action, and the Eleazers
amended their complaint to allege that Nordstrom had breached the statutory
warranty deed and to seek damages from her. BHLLC and Nordstrom filed
counterclaims against the Eleazers, including a claim for breach ofthe promise
contained in the Form 34 addendum.
In May 2013, on cross motions for partial summary judgment, the trial
court dismissed the Eleazers' claims, rejected their request for dismissal of the
counterclaims of BHLLC and Nordstrom, and ruled that the "Eleazers are in
breach ofthe Form 34 promise to grant an OSS easement to the Bush House."
The trial court ordered the Eleazers to grant and record an OSS easement in a
form acceptable to the SHD.
If Eleazers fail or refuse to grant and record an OSS easement in a
form acceptable to SHD within a reasonable time, but no later than
July 1, 2013, this Court will appoint a Special Master under CR 70
No. 70513-0-1/6
and RCW 6.28.010 to grant and record such an easement, upon
motion to approve language.
The Eleazers sought discretionary review of this order.2
On June 27, 2013, upon the three defendants' joint motion to implement
the May 23 order, the trial court appointed a special master to sign and record an
easement on or after July 1, 2013. The easement to be signed and recorded
was attached to the court's order and set forth in detail the legal descriptions of
the easement. It was eight pages long and addressed such issues as the grant,
access to the Eleazers' property and the septic system, maintenance of the
system, obligations to repair the system, risk of loss resulting from the Eleazers'
negligence, enforcement of rights granted in the easement, securing the
grantee's rights and economic losses as a lien against the Eleazers' real
property, and attorney fee entitlements.
In resisting the trial court's orders, the Eleazers stated that when they
received the survey of the easement, they were "stunned, totally taken by
surprise," because they "had no idea" an easement for the Bush House OSS
could be "that huge," adding "[i]t even goes under our house."
On September 11, 2013, the trial court granted the Eleazers' motion for
discretionary review certification pursuant to RAP 2.3(b)(4).
The Court certifies pursuant to RAP 2.3(b)(4) that its May 23, 2013
partial-summary-judgment order involves controlling questions of
law between the parties as to which there is substantial ground for
2The Eleazers argue that the trial court erred in enforcing the restrictive covenants.
Although the order signed by the trial court, as proposed, included conclusions as to the SHD's
right to enforce the restrictive covenants and the Eleazers' alleged breach of the restrictive
covenants, the trial judge excised these provisions before affixing his signature.
No. 70513-0-1/7
a difference of opinion and that immediate review of the order may
materially advance the ultimate determination of the litigation and
provide for judicial efficiency.
Our commissioner granted discretionary review of two issues related to
the enforceability of the provision contained in the Form 34 addendum: (1)
whether the agreement is an unenforceable agreement to agree, and (2) whether
it merged into the statutory warranty deed upon closing.3'4
II
The Eleazers contend that the trial court erred by granting specific
performance and imposing easement terms. This is so, they aver, because the
provision contained in the Form 34 addendum was merely an agreement to
agree. Although the Eleazers are correct that the trial court erred, the court's
error does not entitle them to receive more than they bargained for in the
REPSA. By closing the sale, both the Eleazers and Nordstrom accepted
performance of the contract as to all other material terms. The promise
contained in the Form 34 addendum was one that subjected both buyer and
seller to a duty of good faith and fair dealing. However, if the parties could not
reach a good faith agreement, each was entitled to refrain from closing. Thus,
under the facts of this case, the trial court erred both by granting specific
3Although our commissioner concluded that other issues raised by the parties did not
meet the stringent criteria for discretionary review, she allowed that, "the parties may brief any of
those issues to the panel considering the appeal, and the panel may address such issues." We
choose not to do so.
4 BHLLC appears to argue that discretionary review was improperly granted. Although
RAP 17.7 permits objection to a ruling of a commissioner, objection may only be made by a
motion to modify the ruling directed to the judges of the court not laterthan 30 days afterthe
commissioner's ruling is filed. BHLLC did not avail itselfof this procedure and may not
circumvent the strictures of RAP 17.7 by challenging the commissioner's ruling in its merits brief.
No. 70513-0-1/8
performance of terms never agreed to by the contracting parties and by granting
that performance in favor of two parties to the litigation who were not a party to
the contract itself.
"An appellate court reviews a partial summary judgment order de novo
and engages in the same inquiry as the trial court." Woo v. Fireman's Fund Ins.
Co., 161 Wn.2d 43, 52, 164 P.3d 454 (2007). Summary judgment is appropriate
where there are no genuine issues of material fact and the moving party is
entitled to judgment as a matter of law. CR 56(c).
"[A] grant of easement must describe a specific subservient estate; that is
an absolute." Berg v. Ting, 125 Wn.2d 544, 549, 886 P.2d 564 (1995). "[A]ny
words which clearly show the intention to give an easement... are sufficient to
effect that purpose, providing the language is sufficiently definite and certain in its
terms." Beebe v. Swerda, 58 Wn. App. 375, 379, 793 P.2d 442 (1990).
On the other hand, "[agreements to agree are unenforceable in
Washington." Keystone Land &Dev. Co. v. Xerox Corp.. 152Wn.2d 171, 176,
94 P.3d 945 (2004). This is designed to "'avoid trapping parties in surprise
contractual obligations.'" Keystone, 152 Wn.2d at 178 (quoting Teachers Ins. &
Annuity Ass'n of Am. v. Tribune Co.. 670 F. Supp. 491, 497 (S.D.N.Y. 1987)).
Therefore, "for a contract to form, the parties must objectively manifest their
mutual assent" and "the terms assented to must be sufficiently definite."
Keystone, 152 Wn.2d at 177-78.
"When specific performance is sought, rather than legal damages, a
higher standard of proof must be met: 'clear and unequivocal' evidence that
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No. 70513-0-1/9
'leaves no doubt as to the terms, character, and existence of the contract.'"
Kruse v. Hemp, 121 Wn.2d 715, 722, 853 P.2d 1373 (1993) (quoting Powers v.
Hastings. 93 Wn.2d 709, 717, 713, 612 P.2d 371 (1980)); see ajso Restatement
(Second) of Contracts § 362 (1979).
"For specific performance is demanded that degree of certainty and
definiteness which leaves in the mind of the court no reasonable
doubt as to what the parties intended, and no reasonable doubt of
the specific thing equity is to compel to be done. The element of
completeness denotes that the contract embraces all material
terms; that of certainty denotes that each one of these terms is
expressed in a sufficiently exact and definite manner."
Haire. 63 Wn.2d at 287 (quoting 49 Am. Jur. § 25, p. 38). "It is unthinkable that
courts should undertake the writing of contracts for sellers and buyers who have
failed or refused, rightly or wrongly, to come to terms between themselves."
Haire, 63 Wn.2d at 287.
Before addressing the propriety of the trial court's order, we pause to
clarify that, although our commissioner granted discretionary review ofthe
question whether the provision contained in the Form 34 addendum was an
agreementto agree, that is notthe appropriate inquiry. The agreement to agree
inquiry presupposes that no valid contract otherwise exists, which is not the case
here given that the parties entered into a contract and performed nearly all of
their obligations thereunder. Given the existence ofa substantially-performed
contract, the germane inquiry, and the one that we embark upon, is whether the
provision contained in the Form 34 addendum was sufficiently certain and
definite such that specific performance was an appropriate remedy. In addition,
No. 70513-0-1/10
and more specifically, we must determine which contractual obligation is an
appropriate subject for a grant of specific performance.
With the scope of our inquiry delimited, we proceed to address the
propriety of the trial court's order. The provision contained in the Form 34
addendum to the REPSA consists of two sentences: "Buyer agrees to grant
access for maintenance of OSS to Bush House B&B. Access to be granted in
the form of a recorded easement agreeable to both parties." (Emphasis added.)
Neither the Eleazers nor Nordstrom dispute that this provision was a material
term of the REPSA, and the record reveals that the provision has not been
performed; that is, the parties to the REPSA have not agreed to the terms of an
easement. Nevertheless, the trial court ordered the Eleazers to grant an
easement to BHLLC—a nonparty to the REPSA—that was also agreeable to the
SHD—also a nonparty to the REPSA—by July 1, 2013, and when the Eleazers
failed to comply with this order, the trial court transformed the two sentence
promise in the Form 34 addendum into a detailed eight page easement.5
In order to impose specific easement terms, it would have been first
necessary for the trial court to be presented with clear and unequivocal evidence
that left no doubt as to the specific terms agreed to by the Eleazers and
Nordstrom. These terms would have needed to be sufficiently certain and
definite such that no reasonable doubt was left in the mind of the trial judge as to
what the parties intended and as to what terms should be imposed. The record,
5 Nordstrom, the only party who ever did, in fact, have a contractual relationship with the
Eleazers, was conspicuouslyabsent from the easement agreement imposed by the trial court.
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No. 70513-0-1/11
however, contains no evidence offered to the trial court suggesting that the
parties agreed to any specific easement terms. Tellingly, the trial court imposed
specific terms of an easement only after it had determined that the Eleazers
failed to comply with its order to record an easement agreeable to the SHD.
The easement imposed by the trial court contains a number of terms that
were not mentioned in the REPSA. The imposition of these terms hinders the
Eleazers' use and quiet enjoyment of their land, augments their exposure to
financial risk, and decreases the resale value of their property. While the
impropriety of the trial court's order does not stem directly from the harm done to
the Eleazers' interests, the harm reflects the paramount importance of requiring
certain and definite terms; in the absence of such terms, a trial court will
inevitably—and inappropriately—assume an authorial role in enforcing the
contract.
• Time of access. BHLLC is given a right of access in order to ensure
the proper function, inspection, maintenance, and repair ofthe OSS
between the hours of 8:00 a.m. and 5:00 p.m., Monday through
Saturday. In the event ofan emergency, however, BHLLC is entitled
to access at any time. The liberal access granted to BHLLC precludes
the Eleazers from enjoying the sense of repose attendant to residential
property ownership and is likely to decrease the resale value ofthe
property. More significantly, the specificity ofthese terms comesfrom
the trial judge's mental processes, notfrom the REPSA.
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No. 70513-0-1/12
• The SHD access. Not only is BHLLC given the right to access the
easement, the SHD—or a regulatory body performing the same
functions as the SHD—is given unlimited access, to the extent it is
reasonable and necessary to carry out their regulatory responsibilities.
The liberal access granted to SHD similarly precludes the Eleazers
from enjoying the sense of repose attendant to residential property
ownership and is likely to decrease the resale value of the property.
More significantly, the specificity of these terms finds its genesis in the
trial judge's thought processes, not in the REPSA.
• Grantor negligence. The Eleazers are held responsible for repairing
any damage to the OSS occurring as a result of their own negligence.
Because of the exposure to significant liability in the event that the
Eleazers unintentionally damaged the commercial grade OSS that is
underneath nearly their entire property, the Eleazers assume a
financial risk that they did not agree to assume in the REPSA.
• Grantor use restrictions. The Eleazers are prohibited from using their
property in any way that would encroach upon the easement area.
Notably, they may not place water, power, or utility lines in the area;
they may not plant any plants, bushes, or foliage on the surface of the
area; they may not drive, park, or pave over the area; and, they may
not build any structure over the area. These burdensome restrictions
substantially interfere with the Eleazers' ability to use their land as they
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No. 70513-0-1/13
desire and is likely to decrease the resale value of their property. More
significantly, the specificity of these terms finds its genesis in the
thought processes of the trial judge, not in the REPSA.
• Runs with the land. The easement runs with the land. Given the use
restrictions, loss of quiet enjoyment, and increased financial risk, it is
fair to conceive that—in light of the easement running with the land—
the resale value of the Eleazers' property is likely to decrease. Again,
this provision results from an evaluation made by the trial judge, not
from a reading of the REPSA.
• Disuse or abandonment. The easement is not extinguished by disuse,
abandonment, or transfer. This provision all but ensures that the only
way the easement may be extinguished is by agreement. Again, this
provision is not found in the REPSA.
• Attorney fees. If litigation arises under the easement, the prevailing
party is entitled to an award of costs and attorney fees. The prospect
that the Eleazers would be required to pay what could amount to the
sizeable attorney fees of one or more commercial entities exposes
them to significant financial risk, which could effectively preclude the
Eleazers from even attempting to assert their rights, given the prospect
of financial ruin were they not to prevail. Again, this provision was not
agreed to by the Eleazers and Nordstrom.
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No. 70513-0-1/14
As noted, the imposition of the above terms hinders the Eleazers' use and
quiet enjoyment of their land, augments their exposure to financial risk, and
decreases the resale value of their property. However, it is the omission of
certain terms from the easement imposed by the trial court that could, in fact,
prove even more destructive to the Eleazers' interests.
• Grantee's negligence. Although the easement holds the Eleazers
responsible for their own negligence, no mention is made regarding the
responsibility of BHLLC for its own negligence or intentional acts.
• Act of God. There is no provision identifying which party is responsible
for damages caused by an Act of God. The effect of this omission is
that the Eleazers could be partially or totally responsible for damages
caused by a natural disaster, which would mean that they would be
subsidizing the commercial ventures of BHLLC. The potential for
damage done by BHLLC's sewage—that produced by a hotel and
restaurant—could be far greater than the damage an ordinary single
family homeowner might suffer from an Act of God.
• Third parties. There is no provision identifying which party is
responsible for damages caused by the acts of third parties. Given
that BHLLC is operating two commercial ventures, the presence of
third parties is all but guaranteed. If the Eleazers were held
responsible for damages caused by acts of third parties, they would
be, in effect, subsidizing BHLLC's commercial ventures.
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No. 70513-0-1/15
• Apportionment of fault. There is no provision explaining how, in the
event that both the Eleazers and BHLLC contribute to the OSS being
damaged, apportionment of fault should be made. Furthermore, there
is no provision identifying which party should have the burden of proof
if a dispute arises.
• Grantee financial responsibility. There is no provision explaining how
the grantee is held financially responsible. For example, itwould be
reasonable for the grantor to require the grantee to carry insurance
covering the Eleazers' potential losses. Nor is the financial
responsibility of any tenant of BHLLC or successor to BHLLC
addressed in any way.
• Business tenant causes loss. There is no provision holding BHLLC
financially responsible if a business tenant causes damage to the OSS
or to the Eleazers.
• Transfer approval. There is no provision indicating that the Eleazers
would be required to approve the transfer of the Bush House property.
The absence of such a term effectively leaves the Eleazers without
protection against a financially insecure transferee, particularly given
the dearth of any other terms that would protect the Eleazers from the
associated risks of having a commercial grade septic system on their
property.
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No. 70513-0-1/16
• Grantee guarantee. There is no provision requiring BHLLC to grant a
lien on its property in favor of the Eleazers so as to protect the latter's
interests in the event that BHLLC become insolvent or does not satisfy
a judgment arising from the use of the easement.6
Consideration of both the terms included in and omitted from the
easement imposed by the trial court reveals the peril of foisting upon contracting
parties terms neither bargained for nor agreed to in the contract. Indeed, the
potential for harm is magnified in this case due to the noxious, unsanitary nature
of raw sewage. Unlike an easement for shared use of a driveway, for example,
damage to or mismanagement of the OSS carries with it significant
consequences for not only the value of the properties at issue, but also for the
public health, which is why the SHD is involved in this dispute. As the owners of
a single residential house, it seems entirely conceivable that the Eleazers
would—in exchange for granting easement access to the commercial ventures
on the adjoining property—insist not only on terms that allow them to use and
enjoy their land, but on terms that insulate them from disproportionate exposure
to liability or economic loss.
Ultimately, we agree with the Eleazers that the trial court erred.
Nevertheless, the Eleazers are not entitled to receive more than they bargained
for in the REPSA. Although the court erred by imposing easement terms, it was
understandably concerned with holding the Eleazers to their promise contained
in the Form 34 addendum. Rather than imposing terms foreign to the REPSA,
6 Our discussion of these terms is intended to be illustrative, not exhaustive.
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No. 70513-0-1/17
however, the trial court should have ordered the Eleazers, consistent with the
duty of good faith and fair dealing, to make a "good faith" offer of easement terms
to Nordstrom.7
"There is an implied duty of good faith and fair dealing in every contract,"
which "obligates the parties to cooperate with one another so that each may
obtain the full benefit of performance." Frank Coluccio Constr. Co. v. King
County. 136 Wn. App. 751, 764, 150 P.3d 1147 (2007). "Good faith performance
or enforcement of a contract emphasizes faithfulness to an agreed common
purpose and consistency with the justified expectations of the other party."
Restatement (Second) of Contracts § 205 cmt. a (1979). While this duty does
not foist substantive terms upon contracting parties, it does obligate the parties to
"perform in good faith the obligations imposed by their agreement." Badoett v.
Sec. State Bank. 116 Wn.2d 563, 569, 807 P.2d 356 (1991). Therefore, "the
duty arises only in connection with terms agreed to by the parties." Badgett. 116
Wn.2d at 569.
The parties to the REPSA agreed that the Eleazers would grant an OSS
easement to Nordstrom, on terms acceptable to both parties. This agreement
obligates the Eleazers, pursuant to the implied duty of good faith and fair dealing,
to make a "good faith" offer of easement terms to Nordstrom, meaning thatthe
7We recognize that the duty to make a good faith offer of an easement may be different
in kind from the trial court's order that the Eleazers offer an easement—subject to approval by the
SHD—containing commercially reasonable terms. The Eleazers have a contractual duty of good
faith to make an offer to Nordstrom. The Eleazers' good faith is informed by that which is
expected of a single family house purchaser, paying the price stated for the land to be conveyed,
who is offering to accept commercial quantities ofsewage on to the buyers' land. It is also
informed with the understanding that if the offer is not accepted, the buyers will walk away from
the deal, rather than accept ownership of the real property.
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No. 70513-0-1/18
offer that they will have an opportunity and obligation to make on remand must
maintain both fidelity to the purpose of their promise and consistency with the
justified expectations of Nordstrom. In supervising this directive, the trial court
should remain mindful of the asymmetry between the respective uses of the two
properties: the Bush House property is being used for two commercial
enterprises, whereas the Eleazer property is being used as a single-family
residence.
If, on remand, the Eleazers fail to make a "good faith" offer, then
Nordstrom may seek either damages from the Eleazers or rescission of the
REPSA. If the Eleazers do make a good faith offer, however, then Nordstrom
must either accept the offer, entice the Eleazers to accept a counteroffer, seek
rescission of the REPSA, or forego a remedy.8
In the event that Nordstrom seeks rescission of the REPSA, the following
principles of law will be instructive.
Rescission means to abrogate or annul and requires the
court to fashion a remedy to restore the parties to the relative
positions they would have occupied if no contract had ever been
made. Rescission is an equitable remedy and requires the court to
fashion an equitable solution. The circumstances of each particular
case must largely determine what is necessary for one party to do
in order to place the other in status quo.
Busch v. Nervik, 38 Wn. App. 541, 547-48, 687 P.2d 872 (1984); see also
Cornish Coll. of the Arts v. 1000 Va. Ltd. P'ship. 158 Wn. App. 203, 230, 242
P.3d 1 (2010) ("The trial court has broad discretion in fashioning equitable
8 Ifthe Eleazers make a good faith offer (as determined by the trial court) they will not be
in breach. Nordstrom, however, may reject even a good faith offer and seek rescission—putting
the parties back where they were before closing. This is consistent with the Form 34 agreement.
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relief."). In restoring the parties to the relative positions they would have
occupied had no contract ever been made, the trial court may consider, among
others, factors such as enhanced value from improvements made to the property
by the Eleazers, reasonable rental value during the Eleazers' occupancy, any
property taxes paid by the Eleazers, and any increase or decrease in the value of
the land and house. Busch. 38 Wn. App. at 548. Additionally, any damages
calculated by the trial court should run from the date at which the contract
required performance, in this case the date of closing. See Cornish Coll., 158
Wn. App. at 229 (holding that damages should run from the date at which the
contract required performance where consequential damages were awarded in
addition to specific performance).
Ill
The Eleazers next contend that the provision contained in the Form 34
addendum merged into the statutory warranty deed at the time that Nordstrom
conveyed title to the Eleazers. This is so, they assert, because the provision was
central to the agreement to convey. We disagree.
"Under the merger doctrine, the provisions of a real estate purchase and
sale agreement merge into the deed upon execution of the deed." Ross v.
Kirner. 162 Wn.2d 493, 498, 172 P.3d 701 (2007). "This recognizes parties'
rights to change the terms of their contract at any time prior to performance."
Brown v. Johnson. 109 Wn. App. 56, 59, 34 P.3d 1233 (2001). "However, this
rule is not ironclad." Black v. Evergreen Land Developers. Inc.. 75 Wn.2d 241,
248, 450 P.2d 470 (1969). Although "[i]t is well established that REPSA
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provisions merge into a statutory warranty deed," no merger will occur if the
provisions are "'collateral contract requirements that are not contained in or
performed by the execution and delivery of the deed, are not inconsistent with
the deed, and are independent of the obligation to convey.'" Buck Mountain
Owner's Ass'n v. Prestwich. 174 Wn. App. 702, 732, 308 P.3d 644 (2013)
(quoting Barber v. Peringer. 75 Wn. App. 248, 251-52, 877 P.2d 223 (1994)).
Moreover, there is no presumption of merger where there is no evidence that the
parties intended to relinquish the contractual provisions contained in the REPSA
and courts will endeavor to divine the intent of the parties in making this
determination.
"In all cases then, where there are stipulations in a
preliminary contract for the sale of land, ofwhich the conveyance
itself is not a performance, the true question must be whether the
parties have intentionally surrendered those stipulations. The
evidence of that intention may exist in or out of the deed. If plainly
expressed in the very terms of the deed, the evidence will be
decisive. If not so expressed, the question is open to other
evidence, and / think in absence of allproof, there is no
presumption that either party, in giving oraccepting a conveyance,
intends to give up the benefit ofcovenants ofwhich the conveyance
is not a performance or satisfaction."
Davis v. Lee, 52 Wash. 330, 335-36, 100 P. 752 (1909) (emphasis added)
(quoting Morris v. Whitcher, 20 N.Y. 41 (1859)).
In arguing that an agreement to convey an easement is central, not
collateral, to the agreement to convey, the Eleazers rely on a case decided by
Division Three ofthis court. In Barnhartv. Gold Run. Inc.. 68 Wn. App. 417, 843,
P.2d 545 (1993), a seller promised to convey a dominant estate together with an
easement over the adjoining servient estates. Barnhart, 68 Wn. App. at 418-20.
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Before the deed was executed, the parties entered into a real estate contract,
which included a provision mandating that—in the event that a lawsuit was
commenced between the parties—attorney fees were to be awarded to the
prevailing party. Barnhart. 68 Wn. App. at 418-20. The deed, however, did not
include the attorney fees provision. Barnhart. 68 Wn. App. at 418-20. The deed
did expressly grant the easement agreed to in the real estate contract. Barnhart.
68 Wn. App. at 419. After the deed was executed, the seller sought attorney
fees in connection with the buyers' action to enforce the agreement to convey the
easement. Barnhart. 68 Wn. App. at 424. In affirming the trial court, Division
Three concluded that the basis of the buyers' action to enforce the agreement to
convey the easement was central, not collateral, to the agreement to convey.
Barnhart. 68 Wn. App. at 424. Thus, the seller's contractual right to attorney fees
ended when the deed was executed. Barnhart, 68 Wn. App. at 424.
Barnhart is distinguishable from this case. Unlike in Barnhart. where the
seller promised to grant an easement to the buyer, the contractual provision at
issue here is the buyers' promise to grant an easement to the seller. This
difference is significant in that it eliminated the need for Nordstrom to reserve to
herself an easement in the statutory warranty deed. Furthermore, as it was
Nordstrom who executed the deed, the Eleazers could not have used the deed to
grant an easement to Nordstrom. In short, because the buyers promised to grant
an easement to the seller, the deed is unlikely to yield evidence of the seller's
state of mind. Given the absence of evidence outside of the deed suggesting
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that Nordstrom intended to relinquish the benefit of the Eleazers' promise to
grant to her an easement, we do not presume that such was her intent.
Nevertheless, the Eleazers assert that the deed was inconsistent with the
provision contained in the Form 34 addendum. The two are inconsistent, they
argue, because the deed warranted that the property was free from the type of
easement that the provision "purportedly meant to create." Their argument is
meritless. As noted, the provision contained in the Form 34 addendum merely
stated that an easement was to be recorded that was agreeable to the parties.
The trial court's error in imposing easement terms where no agreement had been
reached did not render the provision inconsistent with the deed. Accordingly, the
provision contained in the Form 34 addendum does not merge into the deed.
Reversed and remanded.910
We concur:
9The Eleazers' May 22, 2014 motion to strike portions of the brief filed by the
respondents is granted.
10 Given that discretionary review was not granted as to the other issues briefed by the
parties, we find no reason to resolve them at this time. Because we reverse and remand, the trial
court's rulings that we decline to address remain interlocutory in nature.
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