King v. Rice

Leach, J.

¶1 In this action for damages claimed for the destruction of a modular living unit situated on recently purchased property, the parties dispute whether the structure was real property conveyed to the buyers with the underlying real estate, or whether it remained the personal property of the seller. An object located on real estate is real property if it is annexed to the realty, its use or purpose is applied to or integrated with the use of the realty, and the annexing party intended it to be a permanent addition to the freehold. Because we cannot say as a matter of law that the structure was real property and because the respondents’ claimed authority to destroy it under the parties’ agreement raises a question of fact, we reverse the summary judgment dismissing the seller’s complaint and remand for further proceedings.

FACTS

¶2 In 2003, respondents Steve and Barbara Rice executed an agreement to purchase real property from appellant Paul King. The agreement, while purporting to convey raw land only, expressly stated that it constituted “the entire understanding between the parties and supersedes all prior or contemporaneous understandings and representations. No modification of this Agreement shall be effective unless agreed in writing and signed by Buyer and Seller.”

¶3 Two structures — a house on a permanent foundation and a modular living unit on blocks — were located on the property. Kang had purchased the modular structure and moved it to the property in 1984. Although the structure included a kitchen, bathroom, bedroom, and living room, Kang alleged he had never hooked it up to utilities and only used it to store a few tools. King further alleged that the parties orally agreed that the structure was his personal property. The purchase and sale agreement made no mention of any structures or personal property.

¶4 The sale closed around April 6, 2004. Escrow instructions signed by both parties included a provision that “[t]he buyer shall have 20 days after closing to remove the house presently built on the parcel.”

¶5 In his complaint, King alleged that he sent a worker to the property between April 11 and April 16, 2004, to prepare the modular structure for moving. This would have been after closing. In his declarations and deposition, however, King stated that the worker actually began preparing the structure for moving prior to closing and was asked to leave the property after closing. Steve Rice partially corroborated this time frame, stating in his declaration that on April 8, after closing, he asked a mover on the property to leave.

¶6 That same day, Rice faxed King a list of conditions for removing the structure, including prior authorization, a storage fee, and liability insurance. King did not respond, but Rice did receive a fax from Roger Knight, King’s paralegal. The fax quoted the escrow provision stating that “[t]he buyer shall have 20 days after closing to remove the house presently built on the parcel.” Knight indicated that this provision required Rice to move the modular structure off the property without damaging it within 20 days. On April 19, Rice demolished the structure with a backhoe.

¶7 King sued the Rices for breach of contract, negligent destruction of personal property, and malicious mischief. He alleged that the structure was his personal property and alternatively that Rice destroyed the structure “by negligence or malicious mischief” or in breach of a written agreement.1 Rice moved for summary judgment on the grounds that King had no interest in the structure because the deed and purchase and sale documents “unambiguously convey title”2 to Rice.3 In colloquy with King’s counsel during oral argument, the court confirmed that the issue before it was what right, if any, King had in the structure and Rice’s position that the purchase and sale documents transferred ownership in the structure to Rice.4 The court agreed with Rice and dismissed King’s complaint. In its oral ruling, the court concluded that the structure was not personal property as a matter of law and that the conveyance documents therefore transferred ownership to the Rices.5 It did not decide any other issue regarding the merit, or lack thereof, of any of King’s claims. It specifically did not “even reach the conversion issue on this motion.”6

¶8 King moved for reconsideration and, for the first time, submitted a closing document in which he granted the Rices an extension for closing. In a “P.S.,” King stated, “We would like about 10 days to move the house.” At the bottom of the document, Steve Rice wrote: “Steve Rice acknowledges receipt of extension of closing till April 6th 2004.”

¶9 After granting a motion to strike the new evidence and other untimely filings, the court denied reconsideration in part because King attempted to “improperly supplement the record with new arguments and evidence that he could have but did not submit to the Court on summary judgment.” The court also denied King’s postjudgment request to amend his complaint to add claims for declaratory relief and breach of contract.7

DECISION

¶10 We review a summary judgment order de novo, engaging in the same inquiry as the trial court and viewing the facts and all reasonable inferences in the light most favorable to the nonmoving party.8 Summary judgment is proper only if the pleadings, depositions, answers to interrogatories, admissions, and affidavits show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law.9 We do not decide appeals on the basis of issues not clearly stated in the moving party’s opening summary judgment papers.10

¶11 King contends the superior court erred in concluding as a matter of law that the modular structure was not personal property and that the conveyance documents therefore transferred it to the Rices. We agree. At common law, personal property is a fixture and, therefore, part of real property if (1) the property is actually annexed to the realty, (2) its use or purpose is applied to or integrated with the use of the realty, and (3) the annexing party intended a permanent addition to the freehold.11 Each element of this test must be met before an article may properly be considered a fixture.12 The annexing party’s objective intent at the time of installation is the most important factor.13 This intent may be inferred from the circumstances, including the nature of the article affixed, the annexor’s relation to the freehold (i.e., owner, lessee, etc.), the manner of annexation, and the purpose for which the annexation is made.14

¶12 It is undisputed that Kang purchased the modular structure and moved it onto his property in 1984. He describes the unit as a “fully contained house, cedar framed with ... a kitchen with mahogany cabinets, two skylights, one bedroom, a sliding glass door, and a large living room.” The structure was wired and plumbed but was never attached to the ground or utilities, was never listed on county tax records as a building, and was used only for storing a few tools. Viewing these facts in a light most favorable to King and in light of the common law test outlined above, we cannot say as a matter of law that the structure was real property.15

¶13 In addition, King correctly points out that the status of an object located on real estate may be determined by agreement, and such agreement “may be either in writing or parol.”16 Because King alleged below that the parties “agreed that the house was my personal property and not to be included in the purchase agreement” and because the parties’ boilerplate integration clause does not necessarily preclude consideration of a parol agreement,17 there may be an additional basis for concluding that the structure was personal property.

¶14 Respondents argue in the alternative that even if the structure is King’s personal property, the escrow instruction stating that the “buyer shall have 20 days after closing to remove the house” gave them authority to destroy it.18 While the meaning of “buyer” is clear and undisputed,19 the meaning of “remove” is not. Specifically, it is not clear that the word “remove” authorized destruction of the modular structure. Under the “context rule” of contract interpretation, the parties’ intent is determined by viewing the contract as a whole, the objective of the contract, the contracting parties’ conduct, and the reasonableness of the parties’ respective interpretations.20 Extrinsic evidence may be considered regardless of whether the contract terms are ambiguous.21 While extrinsic evidence may not modify or contradict a written contract in the absence of fraud, accident, or mistake, we may use it to clarify the meaning of words employed in the contract.22 This is the case even when there is an integration clause, as long as the court uses the extrinsic evidence to explain undefined contract terms, not to modify, vary, or contradict terms of the written contract.23 If extrinsic evidence does not resolve the ambiguity, the contract will be construed against the drafter.24

¶15 On the record before us, we cannot say as a matter of law that the escrow instruction authorized the Rices to destroy the modular structure.25 And contrary to respondents’ assertions, King’s negligence and malicious mischief claims are not barred by the economic loss rule. That rule bars recovery for an alleged breach of tort duties where a contractual relationship exists and the losses are economic losses.26 But the rule does not bar recovery for personal injury or damage to property other than a defect in the property.27 King is therefore not barred from pursuing a tort remedy for the destruction of the structure.

¶16 King also assigns error to the trial court’s denial of his motion for reconsideration. Citing a closing document he first offered below in his motion for reconsideration, he argues that the parties executed what amounted to an addendum to the purchase and sale agreement, that the addendum granted him 10 days to remove the modular structure, and that the Rices breached that provision of the agreement. The superior court, however, ruled that the document did not support reconsideration because King failed to demonstrate that it could not have been discovered and offered prior to judgment. That ruling is supported by the record and the law.28

¶17 Next, King challenges a postjudgment ruling striking certain pleadings as untimely. Although it is difficult to discern his theory of error, he seems to contend that the documents were relevant to several pending motions, not just the motion for reconsideration, and were timely as to those matters. To the extent the stricken pleadings were relevant either to King’s motion to amend, respondents’ motion to strike false information and request for sanctions, or respondents’ application for attorney fees, King fails to demonstrate how any error in excluding them was prejudicial. He has not appealed the decisions denying his motion to amend or granting sanctions. Moreover, those rulings were well within the court’s discretion and supported by the record.

¶18 King’s remaining assignments of error are either meritless29 or unsupported by argument and authority in his opening brief.30 His request for attorney fees, which is raised for the first time in his reply brief, is untimely under RAP 18.1(b) and is therefore denied.

¶19 Reversed and remanded for further proceedings.

Dwyer, A.C.J., concurs.

1 Clerk’s Papers (CP) at 5.

2 CP at 363.

3 Rice’s motion for summary judgment identifies three issues in its statement of issues:

A. Does Paul King have an interest in the construction shack when the deed and purchase and sale documents unambiguously convey title to Steve and Barbara?

B. Should Steve and Barbara be awarded attorneys’ fees and costs under the terms of the purchase and sale agreement and RCW 4.84.185 (prevailing party to receive expenses for opposing frivolous action)?

C. Should sanctions be imposed against Paul King under CR 11 (pleading must be well grounded in fact and warranted by existing law)?

CP at 363.

4 Report of Proceedings (RP) at 4, 22.

5 RP at 40.

6 RP at 43.

7 The court ruled the proposed amendment was- “untimely and futile” and “would be fundamentally unfair and prejudicial to defendants and contrary to policy that favors the efficient & timely resolution of cases.”

8 Hearst Commc’ns, Inc. v. Seattle Times Co., 154 Wn.2d 493, 501, 115 P.3d 262 (2005).

9 CR 56(c); Hearst, 154 Wn.2d at 501.

10 White v. Kent Med. Ctr., Inc., 61 Wn. App. 163, 169, 810 P.2d 4 (1991).

11 Glen Park Assocs. v. Dep’t of Revenue, 119 Wn. App. 481, 487, 82 P.3d 664 (2003).

12 Glen Park, 119 Wn. App. at 487; Dep’t of Revenue v. Boeing Co., 85 Wn.2d 663, 668, 538 P.2d 505 (1975).

13 Glen Park, 119 Wn. App. at 490-91; SSG Corp. v. Cunningham, 74 Wn. App. 708, 711, 875 P.2d 16 (1994).

14 Glen Park, 119 Wn. App. at 488; SSG Corp., 74 Wn. App. at 711.

15 See generally United States v. 19.7 Acres of Land, 103 Wn.2d 296, 301, 692 P.2d 809 (1984) (mobile homes that had wheels, axles, and tongues still attached or stored under them and that rested on concrete blocks retained their identity as mobile units and remained personal property); Clevenger v. Peterson Constr. Co., 14 Wn. App. 424, 426, 542 P.2d 470 (1975) (mobile homes were personal, not real, property where hitches and wheels were removed, but axles were left on, units were placed on blocks rather than permanent foundations, and utility connections were not fixed pipes but rather flexible hoses which could easily be connected).

16 Liberty Lake Sewer Dist. No. 1 v. Liberty Lake Utils. Co., 37 Wn. App. 809, 814, 683 P.2d 1117 (1984).

17 An integrated contract is one where the parties intend a written document to be a final expression of their agreement. Whether the parties intended an integrated contract is generally a question of fact. Emrich v. Connell, 105 Wn.2d 551, 556, 716 P.2d 863 (1986). While boilerplate integration clauses are strong evidence of integration, they are not operative if they are factually incorrect. Denny’s Rests., Inc. v. Sec. Union Title Ins. Co., 71 Wn. App. 194, 203, 859 P.2d 619 (1993). A court may consider evidence of negotiations and circumstances surrounding the formation of the contract, and if the agreement is not completely integrated, additional terms may be proved to the extent they are consistent with the written terms. Denny’s, 71 Wn. App. at 202; Emrich, 105 Wn.2d at 556.

18 Respondents also claim that King had to reserve his rights to personal property in the conveyance documents. They fail, however, to provide, nor are we aware of, any authority supporting that proposition.

19 King conceded in his pleadings and at argument below that he did not intend to have the Rices move the structure off the property and that the escrow instruction was supposed to have said “seller,” not “buyer.” He did not attempt to correct this error by pleading reformation and/or mistake below. See Geoghegan v. Dever, 30 Wn.2d 877, 889, 194 P.2d 397 (1948); In re Estate of Harford, 86 Wn. App. 259, 263, 936 P.2d 48 (1997). Accordingly, the word “buyer” cannot be modified and must be given its plain meaning. See Garrett v. Shriners Hosps. for Crippled Children, 13 Wn. App. 77, 80, 533 P.2d 144 (1975).

20 Berg v. Hudesman, 115 Wn.2d 657, 667-68, 801 P.2d 222 (1990).

21 Berg, 115 Wn.2d at 669.

22 In re Marriage of Schweitzer, 132 Wn.2d 318, 327, 937 P.2d 1062 (1997); U.S. Life Credit Life Ins. Co. v. Williams, 129 Wn.2d 565, 569-70, 919 P.2d 594 (1996) (citing Berg, 115 Wn.2d at 669).

23 Emrich, 105 Wn.2d at 556; Denny’s, 71 Wn. App. at 204.

24 Queen City Sav. & Loan Ass’n v. Mannhalt, 111 Wn.2d 503, 513, 760 P.2d 350 (1988). It is undisputed that the Rices had no hand in drafting the instruction.

25 We note that King argued below that, because the structure was his personal property, he had the right to retrieve it even if the contract allowed the Rices 20 days to remove it. We express no opinion as to the merits of that claim.

26 Alejandre v. Bull, 159 Wn.2d 674, 683, 153 P.3d 864 (2007).

27 Bloor v. Fritz, 143 Wn. App. 718, 738, 180 P.3d 805 (2008); see also Tinwood N.V. v. Sun Banks, Inc., 570 So. 2d 955, 960 (Fla. Dist. Ct. App. 1990) (mere existence of a contractual relationship between the parties does not preclude actions for civil theft and conversion); Burke v. Napieracz, 674 So. 2d 756, 758 (Fla. Dist. Ct. App. 1996) (“Where, as here, it was not merely a failure to perform, but an affirmative and intentional act of converting the funds to his own use by allegedly stealing the monies to which he was entrusted, there is not merely a breach of contract but a separate and independent tort.”); Alex Hofrichter, PA v. Zuckerman & Venditti, PA, 710 So. 2d 127 (Pla. Dist. Ct. App. 1998) (where defendant, by intentional misconduct, converted plaintiff’s property to his own use, this was more than a claim for a simple breach of contract and actions for conversion and civil theft were not barred by economic loss rule).

28 See Wagner Dev., Inc. v. Fid. & Deposit Co. of Md., 95 Wn. App. 896, 907, 977 P.2d 639 (1999); In re Marriage of Tomsovic, 118 Wn. App. 96, 109, 74 P.3d 692 (2003).

29 This includes his argument concerning the trial court’s alleged bias.

30 Although King’s reply brief provided some argument and authority regarding his requests for admission and a continuance, we need not consider submissions made for the first time in a reply brief. State v. Bell, 10 Wn. App. 957, 521 P.2d 70 (1974) (argument and authority raised for first time in reply brief comes too late).