ROLLA W. HALBEWT, JR., ET AL., Appellants, v. HELEN FORNEY, Respondent.
[1] Vendor and Purchaser - Earnest Money Agreement - Legal Description - Necessity. An earnest money agreement for the purchase and sale of platted real property does not satisfy the statute of frauds if the property is not described by the correct plat map lot number, block number, and addition. A street address alone will not satisfy the statute of frauds.
[2] Vendor and Purchaser - Earnest Money Agreement - Legal Description - Deficiency - Reformation. An earnest money agreement for the purchase and sale of real property may not be reformed to correct an inadequate legal description of the subject property unless the inadequate description was the result of a scrivener's error or mutual mistake.
[3] Contracts - Mistake - Unilateral Mistake - Scrivener's Error - What Constitutes - Intended Language. A scrivener's error is an unintended error or omission made by the drafter of a legal document. Contractual language that reads exactly as the parties intended may not be reformed on the basis of scrivener's error.
[4] Contracts - Mistake - Mutual Mistake - Elements - Intentions of Parties - Expression in Contract. A contract may not be reformed on the basis of mutual mistake if the contract expresses the parties' identical intentions.
[5] Contracts - Mistake - Mutual Mistake - Elements - Intentions of Parties - Knowing Error or Omission. A contract may not be reformed on the basis of mutual mistake to correct a knowing error made by the parties or to supply an essential term the parties knowingly omitted, even if they were unaware of the legal consequences thereof.
[6] Vendor and Purchaser - Earnest Money Agreement - Legal Description - Deficiency - Mutual Mistake. An earnest money agreement for the purchase and sale of real property that expresses the parties' intent but that contains an incomplete legal
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description of the property is not subject to reformation on the basis of mutual mistake.
[7] Vendor and Purchaser - Earnest Money Agreement - Enforcement - Material Terms - Necessity. An earnest money agreement for the purchase and sale of real property is unenforceable if it does not contain the material terms of the transaction in addition to the stated price.
[8] Vendor and Purchaser - Earnest Money Agreement - Enforcement - Material Terms - What Constitutes. An enforceable earnest money agreement for the purchase and sale of real property ordinarily will include terms addressing: (1) how forfeiture may be declared; (2) the type of deed to be supplied by the seller; (3) the allocation of risk of damage or destruction; (4) how payment is to be made; and (5) the allocation of responsibility for utilities, taxes, repairs, and capital improvements or indemnification therefor.
Nature of Action: Parties to an earnest money agreement for the purchase and sale of real property sought to have the agreement reformed and enforced by declaration of the court. The agreement did not contain a legal description of the property. It also lacked several other material terms.
Superior Court: The Superior Court for King County, No. 95-2-13278-2, Liem E. Tuai, J., on December 18, 1995, entered a summary judgment in favor of the defendant, ruling that the agreement was unenforceable.
Court of Appeals: Holding that the agreement could not be reformed to correct what the parties knew was an incomplete legal description of the property and that the lack of a legal description and other material terms was fatal to the agreement, the court affirms the judgment.
Laurie M. Halbert and Derek A. Mann, for appellants. Deana A. Pollard and Kenneth H. Davidson of Davidson, Czeisler & Kilpatric, P.S., for respondent.
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ELLINGTON, J. - Rolla and Lynne Halbert and Helen Forney executed an earnest money agreement for the Halberts to purchase Forney's property. Forney refused to honor the agreement. Conceding that the property description did not comply with the statute of frauds, the Halberts brought a declaratory judgment action to reform and enforce the agreement. The trial court granted summary judgment to Forney. We affirm because the document cannot be reformed to correct what the parties knew was an incomplete legal description, and the agreement lacks other material terms in any event.
Facts
On June 26, 1995, Forney and the Halberts executed an earnest money agreement for the sale of property described as "7522 124th PI NE Kirkland, Wa 98033[.]" The Halberts promised to purchase the property for $140,000, with $15,000 down, a 30-year amortization, and a 10-year balloon payment. The agreement did not describe how the debt was to be secured. "With the handwritten portions underlined, these terms appear in the agreement as follows:
Kirkland, STATE OF Washington, RECEIVED OF Rolla & Lynne Halbert the sum of One Thousand and no/100 dollars dollars [sic] ($1,000°°) as earnest money and part payment for the following described real estate, situated in Kirkland, County of King, State of Washington, described as (insert full legal description):
7522 124th PI NE Kirkland, Wa 98033
. . . . which we have this day sold to Rolla & Lynne Halbert (Purchaser) for the total purchase price of $140,000 Dollars ($140,000); balance of purchase price to be paid as follows:
$15,000 down, Contract of $125,000, 30 yr amortization, with 10 yr balloon
with interest on deferred payments at the rate of 7-1/4% percent per annum until paid, the same to be secured by left blank.
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The agreement outlined the manner in which Forney would furnish an abstract of title or a title insurance report and stated that the Halberts would be given possession of the real estate on July 22, 1995. Forney never provided an abstract of title or a title insurance report. Instead, she attempted to return the earnest money five days after she accepted it.
The Halberts filed this suit, asking the court to reform the contract to incorporate an adequate property description and to order Forney to convey good title and possession of the property. Alternatively, the Halberts sought to recover consequential damages.
Forney moved for summary judgment, contending that the contract was unenforceable because it violated the statute of frauds and did not include several material terms, such as how the debt was to be secured, the procedure for declaring forfeiture, and the time and place for monthly payments.
The Halberts conceded that the property description was inadequate, but argued that it could be reformed under the doctrine of mutual mistake, which occurred when all parties assented to using the street address to describe the property because a complete legal description was not readily available.
The court granted Forney summary judgment, ruling that the Halberts were entitled to neither specific performance nor damages.
Discussion
[1] By asking the court to reform the contract, the Halberts implicitly concede that the property description offends the statute of frauds. Their concession is correct, because to comply with the statute, conveyances of land must contain a description of the land that is sufficiently definite to locate it without recourse to oral testimony. Berg v. Ting, 125 Wn.2d 544, 551, 886 P.2d 564 (1995);
RCW 64.04.010; RCW 64.04.020. The Supreme Court has held that street addresses, even when coupled with
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townships and counties, are insufficient to comply with the statute of frauds. Martin v. Seigel, 35 Wn.2d 223, 226-29, 212 P.2d 107 (1949). Instead, a valid description of platted property must generally include the correct lot number, block number, and addition. See Tenco, Inc. v. Manning, 59 Wn.2d 479, 484-85, 368 P.2d 372 (1962). Thus, the principal question on appeal is whether as a matter of law the court erred in granting summary judgment because the agreement can be reformed to comply with the statute of frauds.
The standard for review of a summary judgment order is settled. Such an order is proper only if there are no issues of material fact and the moving party is entitled to judgment as a matter of law. CR 56(c). This court engages in the same inquiry as the trial court and considers only evidence and issues raised below. Washington Fed'n of State Employees, Council 28 v. Office of Fin. Mgmnt., 121 Wn.2d 152, 157, 849 P.2d 1201 (1993); RAP 9.12.
[2] The general rule in Washington is that an inadequate legal description is not subject to reformation. See, e.g., Snyder v. Peterson, 62 Wn. App. 522, 525-26, 814 P.2d 1204 (1991). Reformation is available, however, in circumstances where the inadequate description resulted from a scrivener's error or because of a mutual mistake. See, e.g., Berg, 125 Wn.2d at 553-54. In such cases, the document should not be tested for compliance with the statute of frauds until the document is reformed to reflect the parties' intent. Tenco, 59 Wn.2d at 485.
[3] In Snyder, this court held that scrivener error allowed reformation of a deed in which the legal description lacked the section, township, range numbers, and meridian of a parcel because of their inadvertent omission by the attorney who drafted the deed. Snyder, 62 Wn. App. at 526-27. This case is unlike Snyder, however, because here the parties did not adopt the inadvertent omission of a scribe, but instead agreed to use the street address in lieu of a complete legal description. The document thus reads exactly as the parties intended it to read. In such a case, the doctrine of scrivener error is inapplicable.
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[4-6] The Halberts contend, however, that the doctrine of mutual mistake allows reformation. A mutual mistake has occurred when the parties, although sharing an identical intent when they formed a written document, did not express that intent in the document. Snyder, 62 Wn. App. at 527. The rationale is that, but for the mutual mistake, the parties would have executed the reformed contract. See Tenco, 59 Wn.2d at 485.
The parameters of a mutual mistake for reformation purposes are not explicitly defined by our case law. The Supreme Court has, however, adopted the Restatement's definition of mistake, which is "a belief not in accord with the facts." Simonson v. Fendell, 101 Wn.2d 88, 91, 675 P.2d 1218 (1984) (quoting RESTATEMENT (SECOND) OF CONTRACTS § 151 (1981)). The Restatement recognizes that such mistakes can include a misunderstanding of the law, since the law in existence at the time of the making of the contract is part of the total state of facts at that time.«1» The mutual mistake doctrine may not be invoked to correct knowing errors of parties, however, because if such errors were always corrected, the statute of frauds would be eviscerated.«2» See generally ARTHUR LINTON CORBIN, CORBIN ON CONTRACTS § 340, at 194 (1950); accord Sea-Van Invs. Assocs. v. Hamilton, 71 Wn. App. 537, 543 & n.2, 861 P.2d 485 (1993), rev'd on other grounds, 125 Wn.2d 120, 881 P.2d 1035 (1994). In fact, the
«1» The Restatement provides:
b. Facts include law The rules stated in this Chapter do not draw the distinction that is sometimes made between "fact" and "law." They treat the law in existence at the time of the making of the contract as part of the total state of facts at that time. A party's erroneous belief with respect to the law, as found in statute, regulation, judicial decision, or elsewhere, or with respect to the legal consequences of [that party's] acts, may, therefore, come within these rules.
RESTATEMENT (SECOND) OF CONTRACTS § 151 cmt. b (1981)
«2» The Halberts rely on Snyder for the proposition that mutual mistake can be invoked to insert a legally effective intent into the agreement. The Snyder court analyzed the doctrine of mutual mistake only after concluding that a scrivener's error provided a basis for reformation Snyder, 62 Wn. App. at 526-28. Thus, the discussion of mutual mistake was dicta and was intertwined with the discussion of scrivener's error.
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Restatement contains an illustration demonstrating that reformation cannot be invoked to supply a term the parties knowingly omitted, although unaware of the legal consequence.«3» Reformation is not appropriate where, as here, "the agreement expresses the intent of the parties, but the legal description is . . . incomplete." See Sea-Van, 71 Wn. App. at 543 (quoting Williams v. Fulton, 30 Wn. App. 173, 176-77, 632 P.2d 920, review denied, 96 Wn.2d 1017 (1981)). The Restatement disapproves of reforming instruments like the one at issue here.
This rule is well-founded, for if instruments such as this were routinely reformed, parties would have no incentive to include a proper legal description in any instruments purporting to convey real property. Enforcement of such agreements would effectively nullify the statute of frauds and involve the courts in precisely the "recourse to oral testimony"«4» the statute seeks to avoid. We have no authority to create a holding that leads to such a result. The Supreme Court's 1949 holding still controls: "[I]t is fair and just to require people dealing with real estate to properly and adequately describe it, so that courts may not be compelled to resort to extrinsic evidence in order to find out what was in the minds of the contracting parties." Martin, 35 Wn.2d at 228; see RCW 64.04.010; RCW 64.04.020.
The Halberts nevertheless argue that reformation should be invoked here on equitable grounds, contending that Forney knew the street address was legally defective. See Gammel v. Diethlem, 59 Wn.2d 504, 507-08, 368 P.2d 718 (1962). There is nothing in the record that supports
«3» In relevant part, the Restatement recites:
4. A agrees to sell and B to buy a tract of land for $100,000. They prepare and sign a document that does not, as they both realize, contain a price, although neither party is aware of the legal consequences of this omission. Because, apart from the Statute of Frauds, reformation would not otherwise be appropriate, a court will not, at the request of either A or B, reform the writing to include the price.
RESTATEMENT (SECOND) OF CONTRACTS § 156 cmt. a, illus. 4 (1981).
«4» See Berg, 125 Wn.2d at 551.
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this theory. Instead, the record demonstrates only that the parties, none of whom is alleged to be well-versed in the law of real estate, drafted the agreement together and opted to use only a street address. Halberts claim that Forney knew the street address to be legally inadequate, but represented it as adequate. This claim is based entirely on Lynne Halbert's declaration that "Forney did not have the legal description, but said that the address would do." Nothing in this statement supports an inference that Forney knew the address would not "do." This evidence is insufficient to raise a question of material fact as to fraud. The trial court therefore correctly denied reformation.
[7, 8] Further, the agreement is unenforceable because it lacks numerous material terms. See Sea-Van, 125 Wn.2d at 127-29. The vagueness of the agreement is well demonstrated by the sentence fragment: "contract of $125,000," which seemingly anticipates a second contract that would necessarily include numerous terms to which the parties never agreed. Contemplation of such a second contract is enough to render the earnest money agreement unenforceable. See Hubbell v. Ward, 40 Wn.2d 779, 246 P.2d 468 (1952). The Halberts deny that a second agreement was anticipated, but if the earnest money agreement represented the only contract, numerous other material terms are missing. The agreement makes no provision for declaring forfeiture, fails to specify the type of deed to be supplied, makes no allocation of risk of damage or destruction, requires interest but fails to specify any payment terms, and makes no provision regarding utilities, taxes, repairs, capital improvements, or indemnification.«5» In short, the agreement fails to satisfy the requirements for formation of a contract for the sale of land. See
«5» Like the provisions relating to the type of deed, the agreement contained a space to denote the amount of insurance. This space was left blank. Relevant portions of the agreement read as follows:
Owner agrees to deliver a good and sufficient ___left blank___ deed or contract of sale . . .; Owner agrees to have executed and deliver a ___left blank___ deed conveying, or contract agreeing to convey, said premises upon the financing being made as above specified . . . . Purchaser agrees to keep the buildings on said premises, if any, insured in the sum of $ ___left blank___[.]
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Sea-Van, 125 Wn.2d at 128.«6» What the Supreme Court reiterated in Sea-Van is apropos here: "[Negotiation, not litigation, is the proper method to agree upon these vital terms."
The trial court did not err in finding the agreement unenforceable.
Affirmed.
BAKER, C.J., and GROSSE, J., concur.
Reconsideration denied October 14, 1997.
«6» The Halberts rely on Hubbell, 40 Wn.2d at 782-83 and Hedges v. Hurd, 47 Wn.2d 683, 289 P.2d 706 (1955) for the essential elements of a binding contract for real estate, and assert that Forney did not cite Sea-Van to the trial court and should not be permitted to cite it on appeal. Sea-Van, however, is merely cited as additional authority for the arguments made below. Whether or not Sea-Van was brought to the attention of the trial court, it is controlling authority on the question of the material terms of a real estate contract. See Sea-Van, 125 Wn.2d at 128; see also Kruse v. Hemp, 121 Wn.2d 715, 722, 853 P.2d 1373 (1993). Moreover, the shorter lists of essential elements found in Hubbell and in Hedges are also not satisfied here.