Opinion
No. 57921-5-I.
April 23, 2007.
Appeal from a judgment of the Superior Court for Skagit County, No. 05-2-00453-6, Susan K. Cook, J., entered February 17, 2006.
Affirmed by unpublished per curiam opinion.
Kirk and Grace Wagoner appeal the trial court's order requiring specific performance under an option contract upon payment of $245,000. We affirm. Although the contract indicated the sales price for the property would be determined by averaging the values of the property as established by two independent appraisals, the trial court did not err by disregarding the Wagoners' appraisal. The Wagoners waited 10 months after Pridgen exercised the option before having their own appraisal done. Moreover, they continued to remodel the home during that time. Under these circumstances, the trial court acted reasonably when it set the sales price for the property at the higher of two values established by appraisals done for Pridgen shortly after he exercised the option.
The Option Agreement
Pridgen was on active duty in the Navy when he learned from a friend that his mother was trying to sell the family home. The house had belonged to Pridgen's grandparents and, later, to his parents. Pridgen could not afford to buy the house on his own, but a friend, Kirk Wagoner, offered to help Pridgen buy it.
Pridgen, Wagoner, and Wagoner's wife bought the house in 1997. In 2002, Pridgen became unemployed and fell behind on his share of the house payments.
In 2003, the Wagoners wanted to refinance the mortgage to take advantage of better interest rates. Pridgen agreed, but he was in debt, and the mortgage company was not willing to loan to him. Pridgen was willing to give the Wagoners his equity in the home if he could keep his name on the title. Kirk Wagoner proposed instead that Pridgen be given $26,000 and an option to buy back the property in exchange for Pridgen quitclaiming his interest in the property to the Wagoners. Pridgen agreed.
Wagoner downloaded an option agreement from the internet. He signed the agreement and delivered it to Pridgen. The agreement indicated the purchase price for the property would "be determined by [the] average of two independent market appraisals or a lesser sum agreed upon by both Seller and Purchaser."
Pridgen quitclaimed the property to the Wagoners, but he continued to live in the house rent-free. Eventually, Kirk asked Pridgen to sign a lease and pay rent. Pridgen refused, and the Wagoners initiated eviction proceedings.
Pridgen contacted a lawyer and recorded the option. He also talked with mortgage companies and secured a letter of intent from one of them. He notified the Wagoners he was exercising the option and had the property appraised. An October 2004 appraisal determined the value of the property to be $245,000.
The Wagoners denied that the option was valid and refused to get an appraisal. Pridgen sued for specific performance. He arranged a second appraisal, which valued the property at $230,000.
At trial, Kirk Wagoner testified he offered Pridgen either an option to buy the property or cash from the refinance. Wagoner said he thought that Pridgen, by accepting the money, released any interest he had in the property, including the option to buy it. Wagoner asserted that an appraisal done for him in July 2005 determined the property was worth $371,000.
After closing statements, the judge informed the parties she wanted to consider the chronology of events to determine whether the option was enforceable. She expressed, however, that if she concluded the option was not extinguished by the quit claim deed, the price for the property would be its value when the option was exercised.
On January 10, 2006, the judge issued a letter decision holding that the option contract was enforceable. She further held that, "[t]o the extent [Kirk Wagoner] made improvements after exercise of the option, he did so at his own risk." She asked the parties to schedule a hearing to determine the sales price. Whether such a hearing occurred is not apparent from the record before this court.
On February 17, 2006, the trial court entered findings and conclusions. The court found that the option agreement contemplated the sales price of the property would be its fair market value when Pridgen exercised the option. The court further found that the contract called for a price between $230,000 and $245,000, but Pridgen testified he was willing to pay $245,000 and that amount was a reasonable sum "under the circumstances based upon the evidence of the value of the property." The court ordered the Wagoners to convey the property to Pridgen for $245,000.
The Court Correctly Ordered Specific Performance At A Price That Was The Property's Market Value When Pridgen Exercised The Option On appeal, the Wagoners do not challenge the trial court's decision that the option was valid and enforceable. Rather, they argue the trial court erred by ordering them to convey the property to Pridgen for $245,000. They contend the court essentially rewrote the agreement to require that the Wagoners submit their appraisal fewer than 10 months after Pridgen submitted his appraisal. We disagree with that description. The court determined that the parties intended the sale price of the property to be its market value at the time Pridgen exercised the option.
A court's primary objective when interpreting a contract is to discern the parties' intent. A trial court's findings, when supported by substantial evidence, will be upheld on appeal. When there are no disputed facts, the legal effect of a contract is a question of law to be reviewed de novo.
Thatcher v. Salvo, 128 Wn. App. 579, 585, 116 P.3d 1019 (2005).
Haire v. Patterson, 63 Wn.2d 282, 286, 386 P.2d 953 (1963).
Thatcher, 128 Wn. App. at 585.
Specific performance may be ordered only if the terms of the contract are expressed with sufficient certainty for the court to determine each party's duties and the conditions under which performance is due. However, when a contract imposes a definite obligation but fails to provide a time for its performance, a reasonable time for performance may be implied. What constitutes a reasonable time is a question of fact that depends upon the nature of the contract, the parties' positions, their intent, and the circumstances surrounding performance.
Haire, 63 Wn.2d at 287.
Byrne v. Ackerlund, 108 Wn.2d 445, 455, 739 P.2d 1138 (1987).
Pepper Tanner, Inc. v. KEDO, Inc., 13 Wn. App. 433, 435, 535 P.2d 857 (1975).
The Wagoners assign error to the trial court's conclusions, which the Wagoners contend are actually findings of fact, but the facts are not in dispute. Rather, the Wagoners disagree with how the trial court construed the agreement. They argue that the trial court disregarded the language in the agreement which required the sales price to "be determined by [the] average of two independent market appraisals or a lesser sum agreed upon by both Seller and Purchaser." The Wagoners contend it was not reasonable for the court to allow Pridgen to submit two appraisals, while disregarding their appraisal.
We disagree. The court reasonably found that the parties intended the sales price to be the fair market value of the property when the option was exercised. Considering the nature of the contract, the parties' positions, their intent, and the circumstances surrounding their performances, the court did not err.
See Pepper Tanner, 13 Wn. App. at 435.
Although the contract contemplated independent appraisals from each party, the Wagoners failed to have the property appraised when Pridgen exercised the option. They continued remodeling despite their knowledge of Pridgen's act. Furthermore, one of Pridgen's appraisers testified that real estate values in the area increased significantly "in the last year." Under these circumstances, it would have been unreasonable for the trial court to consider the Wagoners' appraisal in setting the sales price.
The reasoning of a 1943 option case is persuasive, even though the question before the court in that case is different from the issue before us. The issue in Omicron Co. v. Hansen was whether a lease with an option to purchase required the lessor to submit an appraisal before the lessee was bound to exercise its option.
See Omicron Co. v. Hansen, 16 Wn.2d 362, 133 P.2d 505 (1943).
16 Wn.2d 362, 133 P.2d 505 (1943).
The Omicron court held that the contract required the lessee first to decide if it wanted to buy the property. If the lessee so desired, it should notify the lessor and then have the sales price fixed by agreement or appraisal. The court reasoned:
Omicron, 16 Wn.2d at 365-66.
If this is not the meaning of the option agreement, a very unusual situation exists and one which we do not think the parties intended or contemplated. The lessee would be in a position, at any time during the remaining ninety-eight-year period and when it felt market values were to its advantage, to demand of the lessor that a price be fixed by agreement or by appraisal; and, if such price were not satisfactory to the lessee, it would be under no obligation to purchase. This might be done as often as the lessee might elect, with all of its attendant cost and expense, which might be considerable. We do not think this would be fair to the lessor.
Omicron, 16 Wn.2d at 366.
Similarly, it would not be reasonable to interpret the option agreement in this case to allow the sales price of the property to be determined using its market value 10 months after Pridgen exercised the option. The contract anticipated appraisals from each party at the time the option was exercised. Nevertheless, the Wagoners waited and continued remodeling for months before having the property appraised. Moreover, there is evidence that real estate market values significantly increased during that period. Considering these circumstances, the court properly disregarded the Wagoners' appraisal. Setting the price based upon the Wagoners' appraisal would have been unfair to Pridgen.
The trial court did not improperly rewrite or modify the option agreement. Rather, the court correctly interpreted it to mean the sales price of the property would be its fair market value when the option was exercised. The trial court acted within its discretion when it disregarded Wagoners' appraisal and set the sales price for the property at $245,000. The trial court's decision is affirmed. FOR THE COURT: