Summary
finding that a loan for $103,000.00 was exempt from the statute of frauds because it was possible, no matter how improbable, that it could be paid back within one year
Summary of this case from Steadman v. Green Tree Servicing, LLCOpinion
No. 28978-8-III.
Filed: February 10, 2011.
Robert Main borrowed $250,000 from Wells Fargo Bank for construction of a combined business and home structure. Mr. Main asserts that Wells Fargo later promised to lend him an additional $103,000 but then refused the loan. Mr. Main then incurred significant debt attempting to finish construction. Wells Fargo eventually sued to recover on the $250,000 debt, and Mr. Main counterclaimed for damages suffered in reliance on the alleged promise to lend the additional $103,000. The trial court granted summary judgment to Wells Fargo, dismissing Mr. Main's counterclaims. Mr. Main appeals.
The primary question on appeal is whether the alleged promise of a second loan made by Wells Fargo to Mr. Main was exempt from the statute of frauds. Because the request for additional funds was an extension of the first commercial loan and subject to the credit agreement statute of frauds, we conclude that the trial court properly granted summary judgment. Accordingly, we affirm the court's dismissal of Mr. Main's counterclaims.
FACTS
On August 25, 2004, Mr. Main and Wells Fargo entered into a credit agreement whereby Mr. Main borrowed $250,000 from Wells Fargo to complete construction of an automotive restoration/repair shop and attached residential quarters. The loan was due on March 15, 2005. Mr. Main signed a promissory note, a notice of final agreement, and a commercial security agreement granting Wells Fargo a security interest in a number of Mr. Main's vehicles and equipment. One year after Mr. Main failed to repay the loan by an extended due date of June 13, 2005, Wells Fargo filed suit, asking the court to order Mr. Main to produce the cars he had used to secure the loan.
Mr. Main Filed a counterclaim alleging that Barbara Hegstrom, the Wells Fargo loan officer who had assisted Mr. Main on the original $250,000 loan, had encouraged him to continue construction while that loan was being processed and orally promised to loan him an additional $103,000 on behalf of Wells Fargo. Mr. Main asserted that by relying on this promise of additional funds and continuing construction, he incurred an additional debt of $180,000 and was forced by Wells Fargo to auction off $109,000 worth of equipment for $47,000 as a partial repayment. Mr. Main asserted that his contractor had foreclosed on his construction lien, causing Mr. Main to lose all of the equity in his property. Mr. Main requested $400,000 for the loss of equity in his property, $62,000 for the loss in value of his auctioned equipment, and costs and attorney fees as the result of his reliance on Ms. Hegstrom's promise that the second loan would be forthcoming.
Wells Fargo moved for summary judgment on all counterclaims made by Mr. Main. Wells Fargo argued that the conversation Ms. Hegstrom had with Mr. Main did not constitute a promise and, thus, was unenforceable under the doctrine of promissory estoppel. Wells Fargo also asserted that even if the conversation did constitute an oral promise to loan Mr. Main an additional $103,000, the promise was unenforceable under both Washington's general statute of frauds, RCW 19.36.010(1), and Washington's credit agreement statute of frauds, RCW 19.36.100-.140, because the alleged promise was a modification of the existing $250,000 loan rather than a separate agreement. Finally, Wells Fargo argued that Ms. Hegstrom lacked the authority to bind Wells Fargo in the event an oral promise to loan additional funds was made. The court granted Wells Fargo's motion for summary judgment.
Mr. Main filed a motion for reconsideration. He argued for the first time that the credit agreement statute of frauds applied to exempt the loan because the alleged oral promise to loan $103,000 was separate from the original loan of $250,000 and was for household purposes. The court denied Mr. Main's motion for reconsideration.
Mr. Main filed this appeal. Wells Fargo requests attorney fees and costs on appeal pursuant to the terms of its agreement with Mr. Main and RCW 4.84.330.
ANALYSIS
We review an order granting summary judgment de novo, engaging in the same inquiry as the trial court. Greaves v. Med. Imaging Sys., Inc., 124 Wn.2d 389, 392, 879 P.2d 276 (1994) (quoting Syrovy v. Alpine Res., Inc., 122 Wn.2d 544, 548 n. 3, 859 P.2d 51 (1993)). Summary judgment is affirmed when no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Id. (quoting CR 56(c)). All facts and inferences are considered in the light most favorable to the nonmoving party. Id.
The trial court granted summary judgment to Wells Fargo rejecting Mr. Main's argument that he justifiably relied on the promise made by Ms. Hegstrom causing him to change his position and incur losses. Washington recognizes the doctrine of promissory estoppel. See Klinke v. Famous Recipe Fried Chicken, Inc., 94 Wn.2d 255, 259, 616 P.2d 644 (1980) (citing Restatement of Contracts § 90 (1932)).
RCW 19.36.010(1) and RCW 19.36.100 through .140 are relevant to Mr. Main's loan agreement. We first review the general statute of frauds.
Statute of Frauds, RCW 19.36.010(1). The general statute of frauds provides that all contracts, agreements, or promises that cannot be performed within one year are void unless in writing. RCW 19.36.010(1). "[T]he court will examine the surrounding circumstances to ascertain the terms of the contract and to determine whether, by those terms, the contract must of necessity require more than one year to perform. That the contract was not performed within a year, is of no significance; nor does it matter that it was highly improbable that the contract could be performed within one year." Gronvold v. Whaley, 39 Wn.2d 710, 717-18, 237 P.2d 1026 (1951). "The contract must contain `terms' showing that it is not to be performed within a year." Barash v. Robinson, 142 Wash. 118, 127, 252 P. 680 (1927) (emphasis added).
Wells Fargo contends that even if Mr. Main justifiably relied on Ms. Hegstrom's alleged promise for the second loan, the agreement was unenforceable under the statute of frauds. Wells Fargo asserts that the request for the $103,000 was a modification of the original loan rather than a separate contract.
When a second contract is made between the same parties, regarding the same subject matter, the contracts must be interpreted together and if inconsistencies exist, the second contract prevails. Durand v. HIMC Corp., 151 Wn. App. 818, 830, 214 P.3d 189 (2009). Here, the only inconsistent term is the amount of money that Mr. Main borrowed from Wells Fargo. All other terms including the term of years and the commercial nature of the loan would remain intact. Accordingly, Wells Fargo argues that the aggregate sum of the original $250,000 loan and the second $103,000 request for a loan was over $350,000 and was to be paid by Mr. Main over a term of 30 years. Therefore, the agreement would have had a term longer than one year. Additionally, such a large amount of money would, by necessity, take longer than one year to repay.
Alternatively, Mr. Main contends that the $103,000 request was completely separate and detached from the original loan and that the terms were such that he could complete performance within one year. Mr. Main testified that he believed he was receiving two separate loans, and that no term of years was specified for the separate $103,000 loan, so repayment within one year was possible for this smaller amount. He points to Ms. Hegstrom's testimony that "the bank was willing to consider the request, but . . . at that point in time [the bank was] only providing short-term construction financing." Clerk's Papers (CP) at 105.
If the $103,000 request was a modification of the first loan, it was barred by the statute of frauds under RCW 19.36.010(1). If it was a separate loan, it may be exempted from the statute of frauds if its terms may be satisfied within one year. Viewing the facts in the light most favorable to Mr. Main, the second loan was a separate promise under which Mr. Main may avoid the statute of frauds because it was possible for him to complete the terms of the contract within one year, no matter how improbable. Gronvold, 39 Wn.2d at 717-18. However, Mr. Main also must show that the $103,000 request was exempt from the credit agreement statute of frauds.
Credit Agreement Statute of Frauds, RCW 19.36.100-.140. In Washington, a "credit agreement is not enforceable against the creditor unless the agreement is in writing and signed by the creditor." RCW 19.36.110. A "credit agreement" includes any agreement or commitment to lend money or to modify the terms under which the creditor has lent money. RCW 19.36.100. The credit agreement statute of frauds does not apply, however, to "a loan of money or extension of credit to a natural person that is primarily for personal, family, or household purposes and not primarily for investment, business, agricultural, or commercial purposes." RCW 19.36.120(2).
Wells Fargo contends that the second loan was barred by the credit agreement statute of frauds because the original loan provided notice that subsequent oral agreements were unenforceable, as required by RCW 19.36.140. This argument fails. Contract clauses prohibiting oral modification are unenforceable since the prohibiting clause may also be orally modified. Pac. Nw. Group A v. Pizza Blends, Inc., 90 Wn. App. 273, 278, 951 P.2d 826 (1998).
Next, Wells Fargo argues that the $103,000 loan request was commercial in nature and, therefore, not exempt from the credit agreement statute of frauds. Wells Fargo supports this contention by noting that Mr. Main was turned away from the home loan department and referred to the commercial lending department when he obtained the original loan. The documents — including the promissory note, the commercial security agreement, and the notice of final agreement — specify that the original loan was a commercial loan for business purposes. With respect to the $103,000, Ms. Hegstrom stated that the issue at her meeting with Mr. Main was cost overruns and the additional funds needed to complete the project. Indeed, Mr. Main agreed the "[c]ost of it went a little wild on us." CP at 84. This evidence strongly supports Wells Fargo's position that the purpose of the second loan was commercial in nature, not personal.
Mr. Main contends that the $103,000 loan was exclusively for personal use exempting it from the credit agreement statute of frauds. Wells Fargo contends that the court should not consider Mr. Main's argument that the $103,000 loan was a household loan because a party may not assert new legal arguments after an adverse decision has been entered. However, where, as here, a new issue may be raised for the first time on a motion for reconsideration if it is not dependent on new facts and is closely related to the original theory. See Nail v. Consol. Res. Health Care Fund I, 155 Wn. App. 227, 231-32, 229 P.3d 885 (2010).
Supporting this contention is Ms. Hegstrom's recollection that "there was additional costs involved with the amount of concrete that was required to build the subterranean structure." CP at 112. This subterranean structure was to be the residence of Mr. Main and was, thus, a household expense. Additionally, Mr. Main testified that he specifically placed the telephone call to Ms. Hegstrom to ensure funding of the $103,000 before purchasing kitchen hardware, cabinets, and a dishwasher, all of which were for personal use.
However, even though Mr. Main may have relied on the $103,000 for items and construction of a more personal nature, the funds were still used for construction costs flowing from the original loan for the automobile shop project. Mr. Main has failed to provide substantial evidence to the contrary.
Mr. Main's request for an additional $103,000 was not exempt from the credit agreement statute of frauds. We affirm the trial court's order granting summary judgment to Wells Fargo and, pursuant to the parties' loan agreement provision, award attorney fees and costs on appeal to Wells Fargo.
A majority of the panel has determined this opinion will not be printed in the Washington Appellate Reports, but it will be filed for public record pursuant to RCW 2.06.040.
SIDDOWAY, J. and BROWN, J., Concur.