Opinion
No. 26401-7-III.
April 14, 2009.
Appeal from a judgment of the Superior Court for Okanogan County, No. 05-4-00046-4, Jack Burchard, J., entered August 7, 2007.
Affirmed by unpublished opinion per Korsmo, J., concurred in by Schultheis, C.J., and Sweeney, J.
UNPUBLISHED OPINION
This is one of two linked appeals arising from numerous trial court filings related to the sale of a ranch in Okanogan County. The original would-be purchaser under a real estate purchase contract was out-bid during probate proceedings by another purchaser who was allegedly solicited by the seller. On a motion for revision, the superior court confirmed the rulings of the probate court. We agree that the superior court properly denied revision and affirm the judgment below.
The other matter is Elliott v. Estate of Harder, consolidated case No. 27029-7-III.
BACKGROUND
The procedural history of this action is complicated. Dr. James Harder, a resident of California, purchased a ranch in Okanogan County in 2003. Two years later a California court appointed his son, Thomas Harder, as Dr. Harder's guardian and conservator. An ancillary guardianship was established in Washington shortly thereafter. The following summer, the ranch was listed for sale with an asking price of $900,000. Less than two months later, Alicia Elliott entered into a real estate purchase and sale agreement (REPSA) with Thomas Harder to purchase the ranch for $880,000.
An addendum to the REPSA, initialed by both Ms. Elliott and Mr. Harder, imposed two conditions that had to be met before the December 15, 2006 closing date. First, the seller had to "obtain any and all required court approvals of the sale of the Property." Second, the seller had to resolve a quiet title action involving the ranch. The addendum expressly stated that both of these were conditions precedent to the sale. Each condition also stated that the buyer's earnest money would be refunded if the condition was not satisfied.
The closing date was extended to January 31, 2007, in order to accommodate conclusion of the quiet title action. Meanwhile, Jay Hanseth, managing partner of JMH-2 Investments, LLC (JMH2), inquired of Mr. Harder about the property in November, 2006. Mr. Harder told Mr. Hanseth about the pending sale to Ms. Elliott, but also indicated he would take another offer for the property if he could get more money or pay less in brokerage fees. He solicited an offer from Mr. Hanseth.
The quiet title action was settled in December and orders were entered December 27, 2006. Three days later, Dr. Harder died in Oklahoma. Unaware of Dr. Harder's death, Mr. Harder's attorney on January 4, 2007, filed the guardian's petition and notice of sale. The appended declaration of Mr. Harder indicated the intent to sell the property to Ms. Elliott per the REPSA for $880,000 with a closing date of January 31. Notice of the sale was published twice and proof of publication filed with the court January 23.
The closing date was extended to April 6, 2007, in order to obtain a necessary appraisal of the property. The addendum that extended the closing date was signed by all of the potential Harder heirs. It included the following language:
This Addendum supersedes any conflicting terms in the Agreement and all other terms of the Agreement which have not been modified or superseded by this Addendum are ratified and shall remain in full force and effect.
The same language was used when the closing date later was extended to May 4. CP 359-363.
Dr. Harder had died intestate and had a wife living in Oklahoma; his children lived in California, his state of residence. The four potential heirs reached an agreement on settling the estate and filed the agreement in the Okanogan County Superior Court. Thomas Harder was appointed the personal representative of the estate and was authorized to negotiate the sale of the Okanogan ranch property subject to the approval of the court. The settlement agreement recognized that Ms. Elliott had entered into an agreement to purchase the property subject to court approval. It also noted that JMH2 had indicated that it would offer to purchase the property for $900,000 on the same conditions as the Elliott sale.
There apparently was a holographic will of questionable validity. The four potential heirs reached an agreement of their own under which Dr. Harder's interest in a condominium in Oklahoma went to his wife and the four would share the proceeds of the Okanogan ranch sale.
The superior court on April 17, 2007, entered an order transferring the guardianship proceedings to a probate proceeding. Thomas Harder was granted nonintervention powers except with regard to the sale of the ranch, which required court approval. On the same day, he filed a notice of intent to sell the property to Ms. Elliott for $880,000 per a negotiated agreement. The notice of probate and appointment of the personal representative was published April 25, 2007.
Mr. Hanseth filed an affidavit with the court on April 27 asking the court to sell him the property for $900,000, or, alternatively, for $968,000. He deposited a cashier's check for $200,000 with the clerk of court per RCW 11.56.110. A proposed sales agreement was attached to the offer. It included an acknowledgement that "this offer is subject to court approval."
A 10 percent increase over the Elliott bid.
A hearing was held May 1, 2007 before a district court judge sitting as a superior court judge pro tempore on several motions: (1) to confirm sale to Ms. Elliott; (2) JMH2 petitioned for a sale of the property to it; (3) a petition to acknowledge the JMH2 bid; and (4) a motion to dissolve a lis pendens. The court denied the first two motions to sell to the competing bidders and also dissolved the lis pendens. The court orally ruled that the statutes governing both guardianship and probate sales required court approval of the sale of realty. The court also acknowledged the JMH2 bid and found that it constituted an upset offer under the upset statute, causing the provisions of chapter 11.56 RCW to kick in. The court concluded that Ms. Elliott's bid was upset under the statute. Written orders confirming these rulings were entered May 22.
On May 18 and May 23 the estate formally notified Ms. Elliott in writing of the JMH2 bid. The initial letter did not state the amount of the bid, but referenced an affidavit that was not enclosed with the letter. The May 23 letter did contain a copy of the affidavit. Both letters were sent via overnight certified mail. Ms. Elliott filed a $250,000 creditor's claim against the estate on May 21. Mr. Harder rejected the claim June 8.
Ms. Elliott knew of the actual amount. At the May 1 hearing, her counsel told the court that there had been an upset bid in the amount of $968,000. Report of Proceedings (RP) (May 1, 2007) 57. She also had received the affidavit by fax on April 27. CP 184.
On May 25, Mr. Harder filed a motion to determine the end of the time period for Ms. Elliott to make a higher bid. The trial court on May 29 ruled that the deadline would be 5:00 p.m. that day. Ms. Elliott did not file an increased bid. While awaiting another bid from Ms. Elliott, JMH2 raised its offer to $1,007,000. The next day Mr. Harder moved for an order directing the sale of the property to the highest bidder. The commissioner entered the requested order on June 1. Ms. Elliott promptly moved for revision of both the May 22 and June 1 rulings.
The superior court judge heard and denied the revision motions on June 15. The judge orally ruled that the court had an independent role in guardianship and probate matters and that the court's primary focus was on value rather than contractual rights. The court also noted that the sales contract itself expressly required court approval and that the heirs could not therefore sell the property independent of the court. Finally, the court determined that Ms. Elliott had received actual notice of the upset bid and that she did not attempt to better the $968,000 offer. Finding no reason that JMH2 could not raise its own bid where there was no competing offer, the court confirmed the sale to JMH2 for $1,007,000.
Written findings of fact, conclusions of law, and order denying revision were entered August 7, 2007. Ms. Elliott then timely appealed the order to this court. She also appealed a series of other rulings in related litigation and sought to consolidate all matters. The estate and JMH2 sought to dismiss all actions on the basis that Ms. Elliott was not a party to the probate or guardianship cases. Our commissioner denied the motion to dismiss, finding that Ms. Elliott had a "personal interest in the issue" under Paris American Corporation v. McCausland, 52 Wn. App. 434, 438, 759 P.2d 1210 (1988), review denied, 111 Wn.2d 1034 (1989). The other files were consolidated into a second action that was linked with this case for argument and decision.
No motion to revise this ruling was ever filed and we do not address it here.
ANALYSIS
This appeal presents both procedural and substantive issues. The arguments will be addressed in roughly the same order as presented by the appellant, although the analysis essentially consolidates several arguments for discussion purposes. We conclude that the trial court followed the proper procedures and interpreted both the REPSA and the relevant statutes correctly. There were no prejudicial errors in the hearing and sale process. We also exercise our discretion to decline to award attorney fees since the parties essentially brought this situation upon themselves.
Findings on Revision.
Ms. Elliott initially contends that the trial court erred in entering findings on the motion for revision. Likening a revision ruling to a summary judgment, she argues that the superior court's findings are superfluous and should be ignored. However, a superior court judge sitting on a motion to revise a commissioner's ruling has the power to enter findings of fact. Grieco v. Wilson, 144 Wn. App. 865, 877, 184 P.3d 668 (2008), review granted sub nom. In re Custody of Wilson, 165 Wn.2d 1015 (2009); In re Marriage of Dodd, 120 Wn. App. 638, 644, 86 P.3d 801 (2004). If the revision judge chooses not to enter findings, then the commissioner's findings are considered to also be the judge's findings. Grieco, 144 Wn. App. at 877; State ex rel. J.V.G. v. Van Guilder, 137 Wn. App. 417, 423, 154 P.3d 243 (2007). When the judge chooses to make findings, they supersede those of the commissioner. Grieco, 144 Wn. App. at 877.
Here, the trial judge had authority to enter findings. He exercised that authority and entered findings. There was no error.
Court Approval of Sale.
The primary issues in this appeal concern the rulings denying the sale to Ms. Elliott and ordering the property sold to JMH2 instead. Ms. Elliott makes several related arguments on these points. She argues that the change from guardianship to probate removed the court's authority to approve the sale once the heirs ratified the agreement. She also argues that the court "approved" the sale when it set the matter for hearing rather than when it issued an order directing a sale. Finally, she argues that the upset statute does not apply to negotiated private sales.
Several statutes govern this situation. A guardian who sells real property on behalf of an incapacitated person must obtain approval from the court. RCW 11.92.110. In particular, that statute directs that the court order will set forth the method being used for selling the property
and terms thereof, and with regard to the procedure and notices to be employed in conducting such sale, the provisions of RCW 11.56.060, 11.56.070, 11.56.080, and 11.56.110 shall be followed unless the court otherwise directs.
(partial). RCW 11.92.115 directs the guardian to file with the court the return of the sale and also contains directions for actions after a sale agreement is made:
. . . after the expiration of ten days from the filing of such return, the court may, without notice, approve and confirm such sale and direct proper instruments of transfer to be executed and delivered. Upon the confirmation of any such sale, the court shall direct the guardian or limited guardian to make, execute and deliver instruments conveying the title to the person to whom such property may be sold and such instruments of conveyance shall be deemed to convey all of the estate, rights and interest of the incapacitated person and of the person's estate. In the case of a sale by negotiation the guardians or limited guardians shall publish a notice . . .; the substance of such notice shall include the legal description of the
property sold, the selling price and the date after which the sale may be confirmed: PROVIDED, That such confirmation date shall be at least ten days after such notice is published.
(partial).
In the event that the incapacitated person should die, either the guardian or a personal representative can transfer the guardianship proceeding to a probate proceeding. RCW 11.88.150(2). The probate statutes authorize the court to order the sale of real estate after the filing of a petition. RCW 11.56.030. The court may direct property to be sold by public or private sale, or by negotiation. RCW 11.56.050. Statutes then direct how to carry out a public sale after public notice, RCW 11.56.060, and a private sale after public notice, RCW 11.56.080. Both statutes anticipate that the court will have approval over the sale.
RCW 11.56.090 sets a minimum price of 90 percent of appraised value, and also contains an appraisal requirement for sale of realty under the private sale and negotiated sale processes. It also indicates that a court cannot confirm a sale if those conditions are not met. RCW 11.56.100 requires the personal representative to file the return of sale with the court whenever a private, public, or negotiated sale has been made. In the event of a sale by negotiation, notice must be published in the newspaper. Ten days after the publication, the court
may approve and confirm such sale and direct proper instruments of transfer to be executed and delivered. But if the court shall be of the opinion that the proceedings were unfair, or that the sum obtained was disproportionate to the value of the property sold, or if made at private sale or sale by negotiation that it did not sell for at least ninety percent of the appraised value as in RCW 11.56.090 provided, and that a sum exceeding said bid by at least ten percent exclusive of the expense of a new sale, may be obtained, the court may refuse to approve or confirm such sale and may order a resale.
RCW 11.56.100 (partial). Tellingly, this statute recognizes all types of sale — public, private, negotiated — as a "bid."
The final statute of interest, RCW 11.56.110, is an "upset" statute that details the process for raising bids for property and sets the trial court's obligations in dealing with multiple bids. In relevant part it provides:
In re Estate of Holburte, 48 Wash. 378, 379, 93 P. 529 (1908).
If, at any time before confirmation of any such sale, any person shall file with the clerk of the court a bid on such property in an amount not less than ten percent higher than the bid the acceptance of which was reported by the return of sale . . . the bidder whose bid was accepted shall be informed of such increased bid by registered or certified mail addressed to such bidder at any address which may have been given by him at the time of making such bid. Such bidder then shall have a period of five days, not including holidays, in which to make and file a bid better than that of the subsequent bidder. After the expiration of such five-day period the court may refuse to confirm the sale reported in the return of sale and direct a sale to the person making the best bid then on file, indicating which is the best bid, and a sale made pursuant to such direction shall need no further confirmation. . . . Provided, however, That the court shall consider the net realization to the estate in determining the best bid.
The trial court followed these statutes in its resolution of this case. Indeed, Ms. Elliott, with one exception discussed separately later, does not allege any failure to comply with the statutes. Rather, she argues they were largely inapplicable due to the subsequent ratification of the original contract by the heirs. Her argument founders on both factual and legal bases.
Ms. Elliott's argument notes that a lengthy and long-standing history of cases shows that heirs can alienate property before a probate closes. E.g., In re Estate of Blodgett, 67 Wn.2d 92, 406 P.2d 638 (1965); Chopot v. Foster, 51 Wn.2d 406, 318 P.2d 976 (1957); Demaris v. Barker, 33 Wash. 200, 74 P. 362 (1903). Indeed, a statute vests title to real estate in the heirs immediately upon the death of the owner. RCW 11.04.250. However, the fact that heirs can alienate realty immediately does not mean that these heirs actually did so here.
The uncertain state of who the heirs were in this case presents an argument for dealing carefully in such situations. Who Dr. Harder's heirs actually were would likely be governed by California, or perhaps Oklahoma, law concerning both holographic wills as well as intestate succession.
Mr. Harder, as guardian, and Ms. Elliott entered into a contract to sell the property of an incapacitated person. They both knew that such contracts required a court to approve and confirm the sale after notice to the public. RCW 11.92.110; RCW 11.92.115. The REPSA therefore included a provision as a condition precedent that the seller "obtain any and all required court approvals." After Dr. Harder died, the matter was transferred to probate court, which has similar requirements. RCW 11.56.100. Ms. Elliott and the heirs agreed to extend the time for closing the sale. In the process of doing so, they ratified the sales agreement and expressly noted that no other provisions were being changed. The obligation to obtain any required court approval was not changed.
The heirs, then, agreed to sell the property on the same basis as the original REPSA — with the approval of the court. As an issue of fact, there simply was no question that the parties still intended to obtain court approval of the contract.
The same result also follows as a matter of law from the statutory scheme quoted previously. The guardianship statutes required sale by way of the probate sale process with notice to the public and approval by the court. RCW 11.92.110. The probate statutes require the same. RCW 11.56.060, RCW 11.56.080-.110. Ms. Elliott argues that because the heirs can encumber or dispose of the realty, the court no longer has a role in the sale once the heirs have acted. That reasoning flies in the face of the statutes. There is little reason for public notice if the court does not have the authority to permit or deny a proposed sale or the public has no right to get involved in the sale. Similarly, there is no purpose in bringing a sale back before the court if the court has no ability to do anything about it. The statutory scheme clearly indicates that a judge will consider and approve or deny any proposed sale of realty, including sales by negotiation. RCW 11.56.100. As a matter of law, the parties could not have avoided court approval if they had wanted to.
RCW 11.56.110 by its terms expressly applies to all probate real estate sales. No matter the nature of the sale, whether by public, private, or negotiated sale, the offer is considered a "bid." Id. Any member of the public, after receiving notice of a proposed sale, has the ability to make a higher bid in accordance with the requirements of the statute. Once a proper "upset" bid is made, the trial court will choose what bid to honor, considering what will realize the most for the estate. Id. The statute does not contemplate the possibility that the parties, even by a negotiated sale, can cut the public out of participation in a sale.
The trial court correctly followed the dictates of the statute in this case. Both the REPSA and the statutes mandated that the court would consider and approve a sale. The upset statute permitted a third party, here JMH2, to become involved and make a better offer for the property. The trial court then could consider which bid was best for the estate. While Ms. Elliott understandably is disappointed that the process undercut her expectation of purchasing the ranch property, it is a process our Legislature has long had in place for conducting probate sales. She has identified no errors in the trial court's handling of this sale. Accordingly, we conclude that the sale to JMH2 was proper.
Notice of Higher Bid.
Ms. Elliott also contends that the trial court erred in determining that she was given timely notice of JMH2's higher bid for the property. She has not proven that she was prejudiced by the alleged error. She also complains that JMH2 was permitted to increase its bid once again. She has no standing to argue that issue.
RCW 11.56.110 directs that a bidder be informed of an increased competing bid by registered or certified mail. The bidder then has five days, not including holidays, to submit a better bid. The statute does not state whether the five-day period runs from receipt or from mailing. We need not decide that issue. The commissioner concluded that granting three days for mailing and excluding the intervening weekend and holiday, CR 6(a), the May 18 mailing resulted in a response date of May 29 for any additional bid. RP (May 29, 2007) 7, 15. Since the letter expressly referenced an affidavit that Ms. Elliott had already received, she had actual notice of the higher bid. Id. at 15. On revision, the trial court agreed that actual notice was sufficient. CP 21.
May 28, 2007 was Memorial Day.
We agree that Ms. Elliott had actual notice of the amount of the competing bid. While the first mailing was defective in not setting forth the amount of the bid, it did reference a document that Ms. Elliott had already received. Furthermore, Ms. Elliott's counsel had already told the court on May 1 that she knew the new bid was $968,000. Under the circumstances, there was substantial compliance with the notice statute. Continental Sports Corp. v. Dep't of Labor Indus., 128 Wn.2d 594, 602, 910 P.2d 1284 (1996). The May 18 mailing advised Ms. Elliott that her time to increase her bid, if she so desired, was running. The trial court correctly determined that Ms. Elliott's deadline for an increased bid was the close of business on May 29.
There also is no indication in the record that Ms. Elliott wanted to file an increased bid. Her counsel indicated that she feared that another bid would waive her argument that the REPSA was binding. RP (May 29, 2007) at 11.
Ms. Elliott also challenges the fact that JMH2 raised its own bid to $1,007,000. She has no standing to challenge that action. While it could have been necessary to resolve the question if Ms. Elliott had submitted an increased bid that was less than the final JMH2 bid, she did not do so and the question does not arise. Having been outbid, she was not harmed when JMH2 further raised its bid. She is not an aggrieved party under RAP 3.1. Accordingly, we conclude Ms. Elliott lacks standing to present this argument.
Lis Pendens.
Ms. Elliott also argues that the commissioner erred in removing her lis pendens filed in the action subject to the other appeal. She did not timely appeal the ruling and cannot present the claim here.
The primary problem is that dissolution of the lis pendens was not challenged in the motion for revision. CP 194-207. The trial judge also expressly noted that the issue was not presented to him. CP 21. An appeal must be filed within 30 days of the decision being challenged. RAP 5.2(a). While the notice of appeal filed in August, 2007, was well within 30 days of the written order denying revision entered August 7, 2007, it was more than 30 days after the commissioner's written ruling was entered on May 22, 2007. Accordingly, if Ms. Elliott wished to challenge the lis pendens ruling she needed to appeal that determination by June 21, 2007, given that she did not present the issue via revision.
The challenge to the dissolution of the lis pendens is untimely. RAP 5.2(a).
The challenge also is moot in light of our resolution of these appeals. IN MATTER OF THE ESTATE OF BARNHART, 27002-5-III (Wash.App. 4-14-2009).
Attorney Fees.
All parties seek reasonable attorney fees. Ms. Elliott and the estate both claim them under the terms of the REPSA. They both, along with JMH2, also seek them under RCW 11.96A.150. That statute states that a court, " in its discretion," may award "reasonable attorneys' fees" in litigation concerning an estate after considering all relevant factors, including whether the estate received a benefit. (Emphasis added.) We find the REPSA inapplicable and decline to exercise our discretion to award fees under the statute.
As to the REPSA, provision Q. states in part that if either party instituted "suit against the other concerning this Agreement, the prevailing party is entitled to reasonable attorneys' fees and expenses." CP 335. Ms. Elliott did not prevail in this action and is not entitled to attorney fees under any theory. The estate is a prevailing party, and this action was, in part, "concerning" the REPSA. However, the estate prevailed by essentially showing that the REPSA was trumped by the upset bid process of RCW 11.56.110. Under the circumstances, we do not think it is appropriate for the estate to treat the REPSA as a nullity for purposes of the sale and still claim it was effective for purposes of a fee award. Having effectively voided the agreement, it may not claim there is still vitality to it.
With respect to the statute, we do not see that JMH2's actions benefitted the estate. Rather, they benefitted its own interest in obtaining the property. It essentially made a business decision to bid on a property that was already subject to a sales contract and could reasonably foresee litigation expenses as a cost of that decision. While the estate arguably received a benefit from its defense of the sale to JMH2, it, too was in that position because of a decision it made to pursue a higher offer. Having made that business decision, we presume that it realized that it might pay substantial litigation fees as a cost of doing business. If JMH2 had been a true interloper, we might reach a different result, but that is not the scenario here.
The estate and JMH2 are entitled to their costs. RAP 14.2. We decline to award reasonable attorney fees for the reasons stated.
Affirmed.
A majority of the panel has determined this opinion will not be printed in the Washington Appellate Reports, but it will be filed for public record pursuant to RCW 2.06.040.
SCHULTHEIS, C.J. and SWEENEY, J., concur.