Opinion
No. 58524-0-I.
May 21, 2007.
Appeal from a judgment of the Superior Court for King County, No. 05-2-20567-9, Richard D. Eadie, J., entered July 5, 2006.
Affirmed by unpublished opinion per Ellington, J., concurred in by Coleman and Dwyer, JJ.
Island Spring, Inc. held a right to match any offer to purchase certain property on Vashon Island. Owner Keystone-Argonaut, LLC (Keystone) was unable to find a buyer, and eventually arranged to donate the 1.5 million dollar property to a community organization, subject to an outstanding mortgage of $307,729. Contending the transfer was a sale, Island Spring argues it should have been able to exercise its right and acquire the property by paying the amount of the mortgage plus the value of any tax benefits accruing from the donation. Because the evidence does not show the conveyance was anything but a gift, we affirm the trial court's summary judgment for Keystone.
BACKGROUND
Island Spring operates a tofu factory and warehouse on Vashon Island. The property in question is an adjacent lot and vacant warehouse. Some 20 years ago, when Keystone invested in Island Spring, Island Spring acquired the property, which is one of a very small number of industrial-zoned sites on Vashon Island. In 1987, Keystone and Island Spring parted company. As part of an agreement severing their investment relationship, Keystone took title to the property subject to Island Spring's right of first refusal:
Island Spring, Inc. is granted a right of first refusal to purchase [the property]. If Edward C. Lynch, Trustee of Keystone-Argonaut Trust receives an offer which he would like to accept to purchase the property, he shall give a written notification of the offer to Island Spring, Inc., which shall have thirty (30) days after receipt of the written notification to notify Edward C. Lynch, Trustee of the Keystone-Argonaut Trust that it will purchase the property. Island Spring, Inc. shall be entitled to purchase the property on the same terms and conditions as the offer of third-party purchaser. . . . If Island Spring does not notify Edward C. Lynch as Trustee that it will purchase the property within said thirty (30) days or does not purchase the property within said forty-five (45) days, the right of first refusal shall be exonerated.
Keystone disputes whether the right of refusal actually applies to the disputed property, but conceded the preemptive right for purposes of summary judgment. See Clerk's Papers at 250-51.
Clerk's Papers at 931.
Until 2002, Keystone leased the property to K-2, a recreational equipment manufacturer. That year, Keystone listed the property for sale, hired a realtor, posted a sign on the premises, and initiated sales discussions with Island Spring. Receiving no offers of purchase, Keystone decided to donate the property, valued at 1.5 million dollars, to charity.
From the outset, Keystone sought to donate the property subject to the donee's payment of the $307,729 mortgage on the property. Initial talks with the Vashon Island School District failed. Keystone thereafter decided to give the property to a new community organization, Vision Vashon. The new organization's charitable status was not yet finalized, so the conveyance was ultimately made to an established charity, the Vashon Island Rotary Foundation, which agreed to devote the property to Vision Vashon's planned use.
In early December 2003, two weeks before the transfer, Keystone notified Island Spring of the ownership change:
Please be advised that Keystone-Argonaut, LLC, as successor in interest to the Keystone-Argonaut Trust, has come to an agreement with the Vashon Island Rotary Foundation, a Washington non-profit 501(c)(3) organization, regarding the ownership of the building on Vashon. On or before December 31, 2003, Keystone-Argonaut, LLC will be giving the building to the Vashon Rotary and this letter is notification to you of the change in ownership. The rights of Island Spring Inc. as established in the Agreement dated October 21, 1987 are not affected by this transaction and remain the same as they were immediately before the gift.
If you have questions regarding this transaction, please contact [name contact information].
Clerk's Papers at 16.
Consistent with the notification letter, Keystone conveyed the property as a gift, subject to Island Spring's rights under the 1987 agreement:
The Grantor/DONor, Keystone-Argonaut Company LLC, . . . as a gift subject only to the existing debt owed . . . in the amount of $307,729.86[,] said amount to be paid by Donee/Grantee at closing, grants, bargains, sells, conveys, confirms, and assigns to Vashon Island Rotary Foundation [the identified real property].
The Grantor/DONor for itself and for its successors in interest . . . does hereby covenant that against all persons whomsoever lawfully claiming or to claim by, through or under said Grantor/DONor and not otherwise, it will forever warrant and defend the said described real estate; provided Grantee/Donee accepts this property subject to the rights, if any, of Island Spring, Inc. pursuant to the October 21, 1987 Agreement.
Clerk's Papers at 401.
Following the transfer, the recipients extensively renovated the facility, which now houses the Vashon Island School District administrative offices, classrooms used by Vashon College, and offices, conference rooms, and storage space used by over 20 community groups and nonprofit organizations.
Eleven months later, in November 2004, Island Spring contacted Keystone to inquire about the transfer, and in June 2005, Island Spring filed this suit alleging breach of its right of first refusal and seeking specific performance or damages.
How Island Spring expects to match Vision Vashon's "offer" became clear only at oral argument, when Island Spring stated it expects to pay the amount of the mortgage plus the value of the tax benefits occasioned by the donation of 1.2 million dollars in equity.
Defendant/Respondents include Keystone-Argonaut LLC, Keystone Trust, and Edward C. Lynch, as trustee and as an individual. Additional respondents are Vision Vashon, Vashon Island Rotary Foundation, and JTSIP, Inc., a corporation wholly owned by the Rotary Foundation to which the property was quitclaimed.
Though the issue is neither raised nor briefed, it appears these additional defendants are allegedly liable for any breach of Keystone's contract with Island Spring as owners of property "subject to the rights, if any" of Island Spring. Clerk's Papers at 401.
The parties stipulated that Island Spring's right of first refusal was not triggered if the conveyance was a gift. The superior court granted summary judgment for defendants on that basis. Island Spring appeals.
The usual standard of review on summary judgment applies.
This court reviews a grant of summary judgment de novo, engaging in the same inquiry as the trial court and viewing the facts and the reasonable inferences from those facts in the light most favorable to the nonmoving party. U.S. Bank Nat'l Ass'n v. Whitney, 119 Wn. App. 339, 347, 81 P.3d 135 (2003). Summary judgment is appropriate where "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." CR 56(c).
DISCUSSION
The requirements for a gift of real property are present donative intent and delivery of the deed. Oman v. Yates, 70 Wn.2d 181, 185-86, 422 P.2d 489 (1967) (gifts in general); Holohan v. Melville, 41 Wn.2d 380, 385, 249 P.2d 777 (1952) (gift of real property). Delivery is not disputed here. Nor is there a reasonable dispute as to donative intent. Keystone's search for a charitable organization capable of accepting the property as a gift is well-documented in local newspaper coverage, conveyance documents, and the very fact of a transfer of equity worth 1.2 million dollars.
Rather, Island Spring contends that as matter of law, Vision Vashon's agreement to pay the outstanding mortgage converted the transaction into a sale, or at least a partial sale, and triggered its right of first refusal.
Whether a transaction is a gift or a sale is often a factual question, as where a party offers only conclusory allegations as to the character of the conveyance, or where the encumbrance is far disproportionate to the value of the equity. But here, the undisputed factual context leads to the conclusion that Keystone gave the property rather than sold it.
See, e.g., Jackson v. Valvo, 179 A.D.2d 1038, 1040, 579 N.Y.S.2d 300 (N.Y.App.Div. 4th Dep't 1992) (remanding for trial where respondent contended he was given the property); Kiel v. Brinkman, 668 S.W.2d 926, 929 (Tex.App. Houston 14th Dist. 1984) (remanding for factual determination whether a gift or sale based on whether property conveyed in exchange for assumption of debt); Rowlee v. Dietrich, 88 A.D.2d 751, 752, 451 N.Y.S.2d 467 (N.Y.App.Div. 4th Dep't 1982) (remanding where proof that conveyance was gift was mere conclusory allegations).
First, payment of some consideration does not change the character of a gift where the value of the property far exceeds the consideration given. Zvolis v. Condos, 56 Wn.2d 275, 276, 352 P.2d 809 (1960) (property was intended as a gift even though recipient agreed to pay obligations for the DONor and to provide for the DONor for the remainder of his life); In re Estate of Little, 106 Wn.2d 269, 286-87, 721 P.2d 950 (1986) (transfer of a million dollar property could be a gift despite a recitation in the deed that the transfer was made in "consideration of ten dollars"); see also Mericle v. Wolf, 386 Pa. Super. 82, 86-87, 562 A.2d 364 (1989) (gift of real estate to hospital not rendered a sale by $1 consideration); Bennett v. Dove, 166 W.Va. 772, 775, 277 S.E.2d 617 (1981) (recitation of $1 valuable consideration did not convert the gift into a sale, so right of first refusal if grantor "desires to sell" not triggered by gift); Isaacson v. First Sec. Bank, 95 Idaho 452, 455, 511 P.2d 269 (1973) (affirming, finding transaction a gift despite language of sale and consideration, and payment of $20,000 equal to one-third property value; right of first refusal to purchase not triggered). Such is the case here. Keystone made a gratuitous transfer of equity worth 1.2 million dollars to a charitable organization, describing the conveyance as a gift. Vision Vashon paid only the mortgage of $307,729.
Island Spring emphasizes that the deed and the tax documentation form describe the transaction in terms including the word "sale." But both forms are standard documents which use terms including "sale" as formalities. For example, the deed recites that Keystone "grants, bargains, sells, conveys, confirms, and assigns." Clerk's Papers at 401. The deed expressly specifies, however, that the transfer is a gift, "subject only to the existing debt owed." Id. The excise tax affidavit lists the amount of the mortgage as the sale price, as required by regulations in effect at the time of the transfer. But the affidavit is supplemented by another form clearly characterizing the transfer as a gift and claiming the gift exemption for all equity in the property. Even to the extent the form reflects payment of tax on a sale, the definition of "sale" for excise tax regulations is broader than the technical legal meaning of that word. State ex rel. Namer Inv. Corp. v. Williams, 73 Wn.2d 1, 4-5, 435 P.2d 975 (1968) ("[a] fair reading of the definition and the exclusions therefrom . . . render it manifest that the legislature intended a broader excise tax coverage on transfers of property interests than one which would be limited to the technical and legalistic meaning of the word 'sale'"). In context, neither the tax forms nor the deed support Island Spring's argument.
Former WAC 458-61-410, repealed by Wash. St. Reg. 05-23-093 (Nov. 16, 2005) ("When any consideration other than love and affection is present in the transfer, the transaction is taxable to the extent of the consideration present. Consideration includes the indebtedness balance of any real property transferred which is encumbered by a lien securing an indebtedness.").
In addition to the tax affidavit form on which Vashon Rotary indicated a taxable sale price of $307,729.86, the Rotary also filed an excise tax supplemental statement on which it clearly identified the transfer as a gift and the $307,729.86 as the amount of outstanding debt on the property. See Clerk's Papers at 245.
The only reasonable inference from the facts here is that drawn by the trial court: Keystone made a gift of the property. Island Spring's right of first refusal was therefore not triggered. Summary judgment was proper, and we affirm.
Indeed, the deed transferred the property "subject to the rights, if any, of Island Spring, Inc. pursuant to the October 21, 1987 Agreement." Clerk's Papers at 401. Island Spring arguably has a right of first refusal should JTSIP, Inc. or Vision Vashon determine to sell the property at some time in the future.
Given our disposition, we need not reach respondents' other arguments (estoppel and inability to match the terms of the offer).