Opinion
No. 64353-3-I.
April 4, 2011. UNPUBLISHED OPINION
Appeal from a judgment of the Superior Court for Whatcom County, No. 05-2-01677-5, Ira Uhrig, J., entered October 19, 2009.
Reversed and remanded with instructions by unpublished opinion per Cox, J., concurred in by Lau, J.; Appelwick, J., concurring in part and dissenting in part.
This case, arising from a January 2005 commercial real estate transaction, is here for the third time. This court's prior opinion, filed on July 7, 2008, held that specific performance of the real estate purchase and sale agreement was improper because the parties' agreement violated the statute of frauds. Nevertheless, following reversal and remand, the trial court awarded damages to Tercel Corporation based on an alleged breach of the purchase and sale agreement by Donald and Karen Rasmussen. The court also declined to award the Rasmussens any restitution based on the alleged lack of sales proceeds from the resale of the lots. Finally, the court awarded attorney fees to Tercel on the damages issue. We reverse and remand to a different judge for further proceedings consistent with this opinion.
Tercel Corp. v. Rasmussen, noted at 2008 WL 2640084, at *1.
DAMAGES
The Rasmussens argue that the trial court's award of damages for breach of an unenforceable agreement was erroneous. We agree.
The supreme court expressly ruled in Schweiter v. Halsey that an agreement for the sale of realty that violates the statute of frauds is unenforceable for purposes of both specific performance and damages. Specifically, the court stated:
57 Wn.2d 707, 359 P.2d 821 (1961).
Id. at 714.
The rule [of Hedges v. Hurd] contended for by appellants applies to those situations where the contract involved is too indefinite in its terms to be specifically enforced, but yet is certain enough to constitute a valid contract for breach of which damages may be recovered. The rule has no application where the contract fails to satisfy the statute of frauds.
Id. at 712 (citing Hedges v. Hurd, 47 Wn.2d 683, 686, 289 P.2d 706 (1955)) (emphasis added).
This case falls squarely within this rule. The purchase and sale agreement fails to satisfy the statute of frauds, as this court expressly held in its prior opinion. Because it is unenforceable under the statute of frauds, it is also unenforceable for purposes of awarding damages.
Tercel makes several arguments why this rule should not apply here. None are persuasive.
First, Tercel relies on Hedges. But in doing so it fails to deal squarely with the rule stated inSchweiter. This approach is particularly unconvincing since the Schweiter court expressly rejected the application of the principle in Hedges to a case where the contract at issue failed to satisfy the statute of frauds. This case is controlled by Schweiter, not Hedges.
Second, Tercel also points to the word "damages" in the first and last pages of this court's prior opinion to justify the damages award on remand. The only issues that were then properly before this court were specific performance and attorney fees. Thus, the language in the opinion about damages is dictum.
Even if this court had expressly ordered the award of damages on remand, such a holding would have directly contradictedSchweiter. There is nothing in this court's prior opinion or the record to suggest any intent by this court to contradict the supreme court's ruling in that case.
Third, the trial court appears to have relied on this court's limited prior ruling as an invitation for it to award damages for the alleged breach. Specifically, the trial court stated:
The Court of Appeals determined that Specific Performance was not available. And, having so decided, it remanded this case for further proceedings and specifically left open the issue of damages, though given clear opportunity to dismiss the damage claim.
Clerk's Papers at 63.
There is no basis to conclude from this court's prior ruling that the trial court was free to ignore the controlling supreme court precedent of Schweiter. Likewise, there is nothing in our court commissioner's letter ruling of March 27, 2009, when this case was before this court for the second time, to suggest that the trial court was free to ignoreSchweiter.
Fourth, Tercel argues that RCW 58.17.205 cures the defective legal description in the purchase and sale agreement that it prepared, notwithstanding our prior holding. We again disagree.
RCW 58.17.205 states:
If performance of an offer or agreement to sell, lease, or otherwise transfer a lot, tract, or parcel of land following preliminary plat approval is expressly conditioned on the recording of the final plat containing the lot, tract, or parcel under this chapter, the offer or agreement is not subject to RCW 58.17.200 or 58.17.300 and does not violate any provision of this chapter. All payments on account of an offer or agreement conditioned as provided in this section shall be deposited in an escrow or other regulated trust account and no disbursement to sellers shall be permitted until the final plat is recorded.
This statute deals with the platting of subdivisions. Nothing in its plain wording refers either to RCW 64.04.010, the real estate statute of frauds, or addresses the consequences of failing to comply with that statute. Thus, RCW 58.17.205 does nothing to modify the requirement that a real estate purchase and sale agreement must comply with the real estate statute of frauds. Whether such an agreement also complies with RCW 58.17.205 is a separate question.
Tercel argues that Geonerco, Inc. v. Grand Ridge Properties IV, LLC, supports its position. But,Geonerco does nothing to change our conclusion that this purchase and sale agreement is unenforceable due to its failure to comply with the statute of frauds. There, the purchaser under a real estate purchase and sale agreement sued the seller for specific performance. Division Two of this court rejected the seller's argument that the agreement failed to comply with the statute of frauds. That was because the parties expressly authorized their agent to insert the correct legal description into the agreement at a later date, and the agent did so. There was no dispute in that case that the legal description was correct: the title company provided it.
146 Wn. App. 459, 191 P.3d 76 (2008).
Id. at 463.
Id. at 466.
Id. at 469.
Id.
The seller also argued that the agreement "violated the statute of frauds by attempting to convey future parcels." The court rejected this argument, apparently relying on what it characterized as an exception in RCW 58.17.205.
Id.
Id. at 470.
There is no need for us to decide whether we agree with Division Two's analysis in Geonerco. That case is distinguishable. The purchase and sale agreement there had a proper legal description attached to it, at the direction of the parties. Thus, the statute of frauds was satisfied, regardless of the provisions of RCW 58.17.205.
In contrast, this purchase and sale agreement does not have a proper legal description either on its face or attached to it. Thus, this agreement does not satisfy the statute of frauds and is unenforceable. Whether the parties complied with RCW 58.17.205 is irrelevant for purposes of either specific performance or damages.
Tercel, 2008 WL 2640084, at *2.
We also note that the Rasmussens do not argue that anyone "violated the statute of frauds by attempting to convey future parcels," as in Geonerco. Their argument is that this real estate purchase and sale agreement fails to satisfy the statute of frauds, the dispositive issue inGeonerco.
See Geonerco, 146 Wn. App. at 469.
For all of these reasons, there is simply no authority for the trial court's award of $245,890.23 in damages to Tercel against the Rasmussens. The purchase and sale agreement is unenforceable both for purposes of awarding damages and for specific performance. We reverse that award.
RESTITUTION
The Rasmussens next argue that the trial court adopted an incorrect measure of restitution on remand. In response, Tercel argues that the trial court properly denied restitution under Rule of Appellate Procedure (RAP) 12.8 "where Tercel lost $245,000 on the sale of the lots." Neither side is entirely correct.
Corrected Brief of Respondent Tercel at 30.
Both parties agree that the question of restitution is controlled by RAP 12.8, and that State v. A.N.W. Seed Corp. is a case that addresses how to interpret that rule. Beyond that, there is little agreement.
116 Wn.2d 39, 802 P.2d 1353 (1991).
In Seed, the supreme court set forth some guiding principles for restitution where an appellate court reverses a trial court judgment. The court explained that, under RAP 7.2(c), "a trial court judgment is presumed valid and, unless superseded, the judgment creditor has specific authority to execute on that judgment." "RAP 8.1 provides for supersedeas in the trial court."
Id. at 44.
Id.
"When the unsuperseded judgment is reversed, after execution thereon, the judgment debtors' recourse is provided by RAP 12.8." That rule provides:
Id.
If a party has . . . involuntarily partially or wholly satisfied a trial court decision which is modified by the appellate court, the trial court shall enter orders . . . appropriate to restore to the party any property taken from that party . . . or in appropriate circumstances, provide restitution.
RAP 12.8 (emphasis added).
"Restitution under RAP 12.8 is an equitable remedy and `trial courts have broad discretionary power to fashion equitable remedies.' A trial court's determination whether to award restitution under RAP 12.8 is reviewed for abuse of discretion."
Ehsani v. McCullough Family P'ship, 160 Wn.2d 586, 589, 159 P.3d 407 (2007) (quoting In re Foreclosure of Liens, 123 Wn.2d 197, 204, 867 P.2d 605 (1994)).
In Seed, the defendant failed to supersede the judgment against it. The property was sold to a third-party at an execution sale by the sheriff. Because of the sale, the property could not be restored to the judgment debtor following reversal by the appellate court. The question was what measure of "value" controlled the restitution to be made to the judgment debtor.
Seed, 116 Wn.2d at 44.
Id. at 42.
Id. at 44.
Id.
The supreme court concluded that the word "value" in RAP 12.8 was limited to the proceeds of the execution sale, not the fair market value of the property at the time of sale. In doing so, the court based its decision on the common law that is summarized in section 74 of the Restatement of Restitution.
Id. at 47.
Id. at 46; see Restatement of Restitution § 74 (1937).
Here, as in Seed, the Rasmussens did not supersede the October 14, 2005, order directing specific performance of the sale to Tercel evidenced by the January 2005 purchase and sale agreement. But unlike that case, the sale that the court ordered here was to Tercel, not a third-party at an execution sale. It is undisputed that the Rasmussens received $1,200,000 from Tercel as the proceeds of this court-ordered sale.
Three questions arise from these facts. First, should restitution be ordered? Second, what is the relevant sale for purposes of considering restitution? Third, what is the proper measure of restitution, if ordered?
The answer to the first question is addressed to the exercise of sound discretion by the trial court. That question has not, as yet, been properly answered for reasons that we discuss later in this opinion.
The answer to the second question is straightforward. The relevant sale for purposes of restitution, if ordered by the trial court on remand, is the sale to Tercel ordered on October 14, 2005. All the cases on which the Rasmussens rely involve the application of restitution to court-ordered sales, not resales of the same property.
See Seed, 116 Wn.2d at 42; Malo v. Anderson, 76 Wn.2d 1, 2, 454 P.2d 828 (1969);Cooley v. Fredinburg, 144 Or. App. 410, 413, 927 P.2d 124 (1996), adhered to as modified on recons., 146 Or. App. 463, 934 P.2d 505 (1997).
The answer to the third question is more complex. Here, we are not faced with the measure of value at an execution sale. Rather, the question is the proper measure of restitution to which the Rasmussens are entitled, provided the trial court orders restitution.
The parties have not adequately briefed the question of the proper measure of restitution, if that remedy is ordered. They should do so on remand. In remanding for further consideration of this issue, we expressly reserve for the trial court the decision of what measure of restitution, if any, is appropriate under the circumstances of this case. We decline to direct the use of any specific measure of restitution.
In this case, the trial court concluded that the Rasmussens were not entitled to any restitution "[s]ince the sale of the 15 lots has resulted in a substantial loss [and] there are no proceeds from the sale." Of course, the sale of each of the 15 lots produced net proceeds for each transaction. The accounting testimony at trial, detailing extensive other charges that were allocated to individual lot sales, appears to be the only basis for the trial court's decision that there were no proceeds from the sales. But this record is devoid of any analysis by the trial court why the extensive other charges to the individual lot sales were appropriate under the circumstances of this case. This failure makes appellate review impossible. To the extent the trial court's decision about these extensive other charges either had or may later have an impact on the question of restitution, they are unsupported and invalid. Accordingly, we also reverse this decision of the trial court.
Clerk's Papers at 32.
See Trial Exhibit 29.
We reject the Rasmussens argument that they are entitled to the net proceeds of sales of individual lots. Those individual lot sales were, presumably, at market value. Seed holds that a judgment debtor is not entitled to the market value of property sold under the provisions of RAP 12.8.
Seed, 116 Wn.2d at 47.
Here, the Rasmussens are essentially asking for the net proceeds based on the market values of individual lot resales after having already received compensation for the original court-ordered sale. That appears to be contrary to the underlying principle announced in Seed.
Tercel argues that the Rasmussens are not entitled to restitution because Tercel did nothing wrong and the Rasmussens did. Specifically, Tercel argues they "renege[d] on [their] contract, in intentionally delaying closing, in trying to disguise the identity of the lots being sold, and in acting in bad faith."
Corrected Brief of Respondent Tercel at 45.
As we have now twice held, the Rasmussens were entitled to rely on our state's strict interpretation of how a defective legal description bars specific enforcement of a real estate contract. Likewise, there is no right to damages based on the same unenforceable agreement. To the extent the Rasmussens relied on these legal principles, it is hard to see why their conduct was inequitable in any respect.
ATTORNEY FEES
The Rasmussens seek reversal of the trial court's award of attorney fees to Tercel on the damages award as well as an award of fees to them for that issue at trial. Both sides request attorney fees on appeal.
Although a contract may be unenforceable, an attorney fees provision in that contract is enforceable in favor of the prevailing party. Whether a party is a prevailing party is a mixed question of law and fact that this court reviews under an error of law standard. Whether a party is the substantially prevailing party is often a subjective question and difficult to assess. As a general rule, the prevailing party is one who receives an affirmative judgment in its favor. If neither party wholly prevails, the extent of the relief accorded depends on a determination of who substantially prevailed. Where multiple and distinct claims are at issue, the trial court should take a "proportionality approach." If both parties prevail on major issues, both parties bear their own costs and fees.
Mt. Hood Beverage Co. v. Constellation Brands, Inc., 149 Wn.2d 98, 121, 63 P.3d 779 (2003) (citingHerzog Aluminum, Inc. v. Gen. Am. Window Corp., 39 Wn. App. 188, 197, 692 P.2d 867 (1984)).
Eagle Point Condo. Owners Ass'n v. Coy, 102 Wn. App. 697, 706, 9 P.3d 898 (2000).
Marassi v. Lau, 71 Wn. App. 912, 917, 859 P.2d 605 (1993), overruled on other grounds by,Wachovia SBA Lending, Inc. v. Kraft, 165 Wn.2d 481, 490-92, 200 P.3d 683 (2009).
Riss v. Angel, 131 Wn.2d 612, 633, 934 P.2d 669 (1997).
Transpac Dev., Inc. v. Oh, 132 Wn. App. 212, 217-19, 130 P.3d 892 (2006); Marine Enter., Inc. v. Sec. Pac. Trading Corp., 50 Wn. App. 768, 772, 750 P.2d 1290 (1988).
Marassi, 71 Wn. App. 917.
Phillips Bldg. Co., Inc. v. An, 81 Wn. App. 696, 702, 915 P.2d 1146 (1996).
Here, the question is who prevails and to what extent they prevail in this litigation.
Tercel should not have prevailed on the damages issue at trial for the reasons already stated in this opinion. Thus, the fee award based on the damages issue should be reversed. The Rasmussens are entitled to fees at trial on that issue because they should have prevailed.
The trial court's decision denying restitution must be reversed for the reasons already stated in this opinion. Whether restitution should be awarded, and, if so, in what amount are still open questions. The award of fees for prevailing on that issue, for both trial and appeal, should abide the final judgment on that question.
SUMMARY
We reverse and remand this case for further proceedings before a different judge. That new judge should enter a judgment that sets aside the award of $245,890.23 in damages to Tercel against the Rasmussens. Likewise, the award of fees at trial to Tercel based on prevailing on the damages issue should be set aside. The Rasmussens are entitled to an award of fees because they should have prevailed on the damages issue.
The judge should also properly exercise his or her discretion in considering whether to award restitution to the Rasmussens. If the judge decides to award restitution, the judge should also decide the proper measure of that remedy.
The award of attorney fees, on appeal and at trial, to the prevailing party based on the issue of restitution should abide the judgment of the trial court on that issue.
Based on the resolution of the issues that we have discussed, there is no need to address the other arguments of the parties.
We reverse and remand to a different judge for further proceedings that are consistent with this opinion.
Why bother with a concurrence/dissent in an unpublished opinion on a case being remanded?
First, unpublished opinions are read by more than the parties. Second, restitution under RAP 12.8 is not an infrequent issue, but there are few published opinions for guidance. Third, our Supreme Court has made it clear that it is appropriate to apply the rules of the Restatement of Restitution (1937) in cases applying RAP 12.8, but many lawyers and judges do not have the Restatement at hand. Fourth, the majority's analysis of the restitution here is wrong and has great potential to mislead in this case and in others. Finally, restitution was poorly briefed and was misapplied by the trial court; guidance is necessary for remand.
I respectfully dissent from the majority's analysis regarding restitution. The majority erroneously asserts that the question of whether restitution should be ordered has not been answered. Majority at 9. The majority rejects the trial court valuation of restitution as lacking analysis, without identifying any legal authority to establish an abuse of discretion. Majority at 10. The majority declines to direct the trial court to use a specific measure of restitution, but then potentially removes market value as a measure of restitution, the correct measure in this case. Majority at 10. They do so when they erroneously conclude that State v. A.N.W. Seed Corp., 116 Wn.2d 39, 802 P.2d 1353 (1991), stands for a general rule "that a judgment debtor is not entitled to the market value of property sold under the provisions of RAP 12.8." Majority at 10.
I. The Trial Court Decided Restitution was Appropriate; It Did Not Abuse its Discretion; the Decision Should Not Be Revisited on Remand
The first error is readily apparent. The trial court did not enter an order rejecting the availability of restitution to Rasmussen. Instead, it took evidence on the issue, engaged in an elaborate calculation of sale proceeds and market values, and determined whether each of a wide variety of expenditures were appropriately deductible from those values. It concluded that because Tercel had a net aggregate loss no restitution was due. Clearly, the trial court determined restitution was applicable in this case, but that no amount in excess of the purchase price paid was due.
The trial court considered restitution under RAP 12.8, because we reversed a prior order of specific performance. Tercel Corp. v. Rasmussen, noted at 145 Wn. App. 1035, 2008 WL 2640084, at *4. The purpose of RAP 12.8's reference to restitution, added to the rule in 1994, is to encourage courts to look at the common law of restitution in construing RAP 12.8.Ehsani v. McCullough Family P'ship, 160 Wn.2d 586, 590-91, 159 P.3d 407 (2007). We look to theRestatement for the common law principles of restitution. Seed, 116 Wn.2d at 45. The purpose of restitution is to remedy unjust enrichment. See Restatement § 1 ("A person who has been unjustly enriched at the expense of another is required to make restitution to the other."); Ehsani, 160 Wn.2d at 594-95. The theory of unjust enrichment permits recovery for the value of a benefit retained absent any contractual relationship because notions of fairness and justice require it. Young v. Young, 164 Wn.2d 477, 484, 191 P.3d 1258 (2008).
Restatement section 74 addresses whether a duty of restitution arises when property has been transferred under a judgment that is later reversed:
A person who has conferred a benefit upon another in compliance with a judgment, or whose property has been taken thereunder, is entitled to restitution if the judgment is reversed or set aside, unless restitution would be inequitable or the parties contract that payment is to be final; if the judgment is modified, there is a right to restitution of the excess.
No evidence suggests that the two exceptions to section 74 apply here: we have no contract providing that payment is to be final or modification of the judgment to concern us. Thus, we have a straight forward application of the rule of section 74.
Under that rule, the parties here were entitled to be returned to their original positions upon reversal of the specific performance order. RAP 12.8; Simonson v. Fendall, 101 Wn.2d 88, 93, 675 P.2d 1218 (1984) ("The general principle is that rescission contemplates restoration of the parties to as near their former position as possible or practical."). The Rasmussens were entitled to return of the fifteen lots transferred under the specific performance order, and Tercel was entitled to return of the contract purchase price paid. But, rescission did not occur. Instead, Tercel retained possession of the lots and the Rasmussens retained Tercel's payment. The trial court has the discretion to evaluate whether restitution is appropriate in such circumstances.Ehsani, 160 Wn.2d at 589. The trial court determined that in these circumstances, restitution was available to the Rasmussens to prevent any unjust enrichment. We have no facts suggesting that restitution would be inequitable. We have no factual or legal basis to conclude that it was an abuse of discretion. Therefore, we have no basis to say the question of whether to award restitution should be revisited on remand. The question is only whether the Rasmussens were entitled to additional restitution, over and above the purchase price, to prevent any unjust enrichment to Tercel.
Both in Seed and in the majority opinion the fact is noted that the debtor did not supersede the judgment.Seed, 116 Wn.2d at 43-44; Majority at 8. Failure to supersede an order of specific performance may result in the inability to obtain specific restitution of the property as it did in both cases. This fact does not affect the right to receive restitution.
II. The Measure of Value for Restitution is the Value Received by Tercel When it Took Possession of the Property; the Trial Court Abused its Discretion Because it Valued the Property at the Time of Subsequent Sale or at the Time of Trial, not Because it Used Market Value
The parties, the trial court, and the majority rely almost exclusively on the analysis of restitution under RAP 12.8 inSeed. Majority at 7. In that case, the State obtained a judgment against Seed and executed on that judgment.Seed, 116 Wn.2d at 42. The sheriff sold Seed's property to satisfy the judgment. Id. The judgment was subsequently reversed, and the court was faced with the question of the appropriate amount of restitution. Id. The sale proceeds were substantially less than the fair market value of the property sold, as established in the second trial.Id. The Supreme Court relied on RAP 12.8 andRestatement section 74 to conclude that restitution was appropriate. Id. at 44, 46. It held that the judgment debtor was entitled to restitution measured by the proceeds of execution, not the fair market value. Id. at 45-47.
While the duty to make restitution under these facts is found in section 74 of the Restatement, the specific rules for determining the measure of recovery are not found in that section. Those rules are found in the chapter on "Rules Generally Applicable to Actions for Restitution" under topic 2: "Measure of Recovery." Restatement at 557. The court inSeed quoted with approval the summary of the measure of recovery rules from the Restatement:
"If the value of what was received and what was lost were always equal, there would be no substantial problem as to the amount of recovery, since actions of restitution are not punitive. In fact, however, the plaintiff [here judgment debtor] frequently has lost more than the defendant [here judgment creditor] has gained, and sometimes the defendant has gained more than the plaintiff has lost.
"In such cases the measure of restitution is determined with reference to the tortiousness of the defendant's conduct or the negligence or other fault of one or both of the parties in creating the situation giving rise to the right to restitution. If the defendant was tortious in his acquisition of the benefit he is required to pay for what the other has lost although that is more than the recipient benefited. If he was consciously tortious in acquiring the benefit, he is also deprived of any profit derived from his subsequent dealing with it. If he [judgment creditor] was no more at fault than the claimant, he is not required to pay for losses in excess of benefit received by him and he is permitted to retain gains which result from his dealing with the property."
(Italics ours.) Restatement of Restitution § 149, at 596 (1937).
The citation to section 149 is incorrect. The quoted material is from the introductory note to the section on measure of recovery. See Restatement at 595 (introductory note to topic 2: "Measure of Recovery"). This introductory note precedes sections 150 to 159. Id.
Thus, the Restatement explicitly establishes that the common law measure of restitution, under these facts, is the proceeds from the sheriff's execution sales, not the market value of the property sold, together with interest from the date of seizure. We so hold because the meaning and intent of the word "value" in RAP 12.8 reflects a word of art; our interpretation is logically consistent with the principles and rationale of common law restitution.
Seed, 116 Wn.2d at 46-47 (alterations in original). Relevant here are sections 151, 154 and 155 of theRestatement. Section 151 applies only where a person by consciously tortious act has deprived another of the title, possession, or other interest in land, chattel, or choses in action. Restatement § 151 cmt. a. Section 154 applies to innocent conversion, where the person takes property tortiously but in good faith and without knowledge that he is not entitled to do so. Restatement § 154 cmt. a. Section 155 applies where neither party was at fault, where the claimant was at fault and the recipient of the property was not, and to cases where both were at fault in nearly equal degree. Restatement § 155 cmt. a.
Restatement section 151 states:
Where a person is entitled to a money judgment against another because by fraud, duress or other consciously tortious conduct the other has acquired, retained or disposed of his property, the measure of recovery for the benefit received by the other is the value of the property at the time of its improper acquisition, retention or disposition, or a higher value if this is required to avoid injustice where the property has fluctuated in value or additions have been made to it.
See also Restatement § 151 cmt. e ("In all such cases, the person deprived can elect to have the value determined at the time of the first conversion, or at the time of any demand if the chattel is still in the hands of the converter, or at the time of disposition.").
Restatement section 154 states:
Where a person is entitled to restitution from another because of an innocent conversion, the measure of recovery for the benefit thus received is, at the election of the claimant, the value of the property
(a) at the time of the conversion, or
(b) i. except to the extent that its value has been increased by the converter, its value at the time of a subsequent demand, if the converter has the property at such time, or
ii. at the time of its disposition, if the converter disposes of it.
Our Supreme Court has previously applied sections 151, 154, and 155 of the Restatement. See Young, 164 Wn.2d at 489-90 (§ 155); In re Marriage of Langham, 153 Wn.2d 553, 568 n. 9, 106 P.3d 212 (2005) (§§ 151, 154).
The Rasmussens have a right of restitution underRestatement section 74. The value of the restitution depends on the character of Tercel's conduct in the acquisition of the property. Restatement § 151 cmt. a, 154 cmt. a. Nothing in the record suggests Tercel acted in a consciously tortious manner, triggering section 151 or acted tortiously but in good faith, triggering section 154. Therefore, the applicable measure of recovery here is controlled by section 155.
The allegations of the Rasmussens breaching the parties' contract are immaterial in light of the statute of frauds violation. No other misconduct is alleged or would matter given the other facts.
Section 155 of the Restatement provides for a limitation on the value that the claimant may recover:
(1) Where a person is entitled to restitution from another because the other, without tortious conduct, has received a benefit, the measure of recovery for the benefit thus received is the value of what was received, limited, if the recipient was not at fault or was no more at fault than the claimant, to its value in advancing the purposes of the recipient, except as limited by the statement in Subsection (2).
(2) Where a transaction is rescinded solely because of a mistake as to price, the recipient's duty of restitution is to pay not less than he expected to pay nor more than the claimant expected to receive.
"Advancing the purpose of the recipient" is reference to the fact that the value of what is given may not be the same as the value of the benefit received by the recipient considering his purposes. Restatement § 155 cmt. b. In such cases the principle of fairness which permits a recipient to have a defense because of a change of circumstances requires that he should not pay more than the value of the benefit he received. Restatement §§ 142, 155 cmt. a.
Application of this clause readily explains the measure of damages in cases like Seed where possession is taken via the execution sale. See Seed, 116 Wn.2d at 42.
The Rasmussens were entitled only to restitution in the amount of the fair market value of the 15 lots at the time Tercel took possession, less the amounts Tercel previously paid, unless Tercel could prove that at the time it took possession the lots were worth less to them than fair market value. Tercel took uninterrupted possession pursuant to the October 14, 2005 order. But, the trial court valued the lots sold by Tercel based on the sale dates (based on proceeds less the deduction of expenses) and valued the lots retained by Tercel at their market value as of trial. This was legal error, and therefore an abuse of discretion. I would reverse the award of restitution on this basis.
The record does not answer whether evidence was adduced at trial that established the fair market value of the property at the time Tercel took possession. Therefore, remand is necessary.
The majority does not address the question of interest on any award of restitution. The Rasmussens sought interest on any award of restitution at trial. It is likely they will do so again on remand. If on remand the trial court determines that restitution, over and above the purchase price paid, is owed to the Rasmussens, they also may be entitled to interest on such amount from the date Tercel took possession of the property. Interest is limited by the Restatement section 156, which provides:
Subject to the rules stated in § 157, a person who has a duty to pay the value of a benefit which he has received, is also under a duty to pay interest upon such value from the time he committed a breach of duty in failing to make restitution if, and only if:
(a) the benefit consisted of a definite sum of money, or
(b) the value of the benefit can be ascertained by mathematical calculation from the terms of an agreement between the parties or by established market prices, or
(c) payment of interest is required to avoid injustice.
In summary, the trial court awards restitution as an exercise of discretion under RAP 12.8. That discretion is not unfettered. The Restatement establishes the common law measure of restitution. Our Supreme Court has cited specifically sections 74, 151, 154, and 155 with approval. On remand, the trial court should carefully consider the application of theRestatement when determining the appropriate measure of restitution.
III. Seed Does Not Preclude Use of Market Value for Valuing Restitution
The majority expressly declines to direct the use of any specific measure of restitution. Majority at 10. However, it appears they have unintentionally done so in a harmful manner. The majority says that Seed stands for the proposition that "a judgment debtor is not entitled to the market value of property sold under the provision of RAP 12.8." Majority at 10. Literally read, that is an unsustainable, overgeneralization ofSeed. However unintended, application of this overgeneralization of Seed to this case eliminates the very valuation rule the trial court must use: market value at time of possession.
Seed does not in fact require that fair market value can never be used and sale proceeds must always be used to value restitution. Seed was limited to recovering the proceeds of the sale, rather than market value, only because it was an execution sale which brought less than market value. Seed, 116 Wn.2d at 42, 47. The Supreme Court noted, "The restitution here sought is but a narrow application of the underlying principle that one person may be `accountable to another on the ground that otherwise he would unjustly benefit or the other would unjustly suffer loss.'" Id. at 45 (quoting Restatement at 1). Seed was but an application of the "advancing the purposes of the recipient" clause of Restatement section 155. Comment b explains the rational for the loss when the property cannot be returned: "If both parties were equally at fault or if there was no fault, the one seeking restitution bears the loss only because there is no reason to shift the loss to the recipient." Restatement § 155 cmt. b.
The Supreme Court also distinguished the result inSeed from two different holdings in DeMayo v. Lyons, 360 Mo. 512, 228 S.W.2d 691 (1950), on which the court of appeals had relied:
The court made two holdings. First, as to property sold at execution, the debtor was entitled to the sale proceeds, which the court noted was at least equal to market value. Second, as to property not sold at execution nor produced, the creditor was liable for the market value. That is quite different from these facts.
Seed, 116 Wn.2d at 49. Following this analysis, had the execution sale brought market value, Seed would have been entitled to it. And, had the execution sale brought more than the market value of the property at the time of the seizure, Seed would have been entitled to the market value and any excess that unjustly benefited the creditor. Further, had there been no sale but the property still could not be returned to Seed, Seed would have been entitled to market value. TheRestatement shifts the risk of loss on an execution sale to the creditor; it does not otherwise preclude recovery of market value. The restitution sought in Seed was specific to a case involving an execution sale, a sale pursuant to a judgment; that fact is not present here. It is inappropriate for the majority to suggest that Seed precludes an award of restitution based on the market value of the property at the time Tercel received possession.
Where the property is taken and sold in satisfaction of a judgment, and the creditor is statutorily obligated to tender any proceeds in excess of the judgment to the debtor. RCW 6.17.140(6) ("When property has been sold or debts received on execution, the sheriff shall pay the proceeds to the clerk who issued the writ, for satisfaction of the judgment as commanded in the writ or for return of any excess proceeds to the judgment debtor.").
IV. Tercel Was Not Entitled to Damages Nor Attorneys Fees; Remand is Necessary
I concur with the majority that damages are not available here due to the rule in Schweiter v. Halsey, 57 Wn.2d 707, 712, 359 P.2d 821 (1961). In our first opinion we concluded that specific performance was not available; the contract was unenforceable because the statute of frauds was violated.Tercel, 2008 WL 2640084, at *4. We remanded for further consideration of the claim for damages and attorney fees. Id. at *5. We did so because Tercel had sought damages as an alternative to specific performance. The alternative claim for damages sought by Tercel had not been decided and was not before us to decide. We anticipated that the contractual damages issue would be dismissed but, that on return of the property to Rasmussen, Tercel might have a claim for equitable "damages" in the form of restitution due to intervening improvements to the property. The trial court failed to dismiss the contract damages claim. The parties failed to make specific restitution of the property. The trial court applied the wrong rules for valuing restitution to Rasmussen. I concur that reversal on the damages issue is required.
I also concur with the majority on the analysis of the attorney fee issues and the need to remand for further proceedings.