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Keystone Development Inc. v. City of Seattle

September 9, 1996


Appeal from Superior Court of King County. Docket No: 93-2-28416-1. Date filed: 12/09/94. Judge signing: Hon. James D. McCutcheon.

Authored by Susan R. Agid. Concurring: William W. Baker, C. Kenneth Grosse.

The opinion of the court was delivered by: Agid

AGID, J. -- Keystone Development and North Shore Limited Partnership, doing business as Wisteria Park Partners, appeal the trial court's order dismissing their complaint. Wisteria alleged that Seattle breached a development rights agreement when it terminated Wisteria's participation in the project without giving it 15 days to address the city's concerns with its proposal, as required by the parties' agreement. We agree with Wisteria that it had an enforceable contract to develop the proposal and that Seattle may have breached that agreement by not giving it an opportunity to cure the defects identified by the city. Whether Seattle's termination was reasonable or arbitrary is an issue of fact to be decided by a jury. Accordingly, we reverse and remand for trial.


In the late 1980's, Seattle began selling 22 parcels of land it owned in the Yesler-Atlantic Neighborhood in the Central Area of Seattle. In 1990, it published a request for qualifications and development proposals (RFP) to work with Seattle in developing market rate housing on 10 of the sites. The RFP described a 2-step process Seattle was using to select developers for the projects. The first step required developers to submit detailed information about their qualifications and a concept description. The second step required the finalist in the first step to submit a full development proposal.

In April 1990, Wisteria Park Partners submitted a response to the RFP proposing to develop Yesler-Atlantic Disposition parcel 8A/9, which Seattle accepted. On September 26, 1990, Seattle and Wisteria entered into an Exclusive Development Rights Agreement (EDRA). At the time, Wisteria was a general partnership between Inner City, Inc. and Keystone. Each had a 50 percent interest in the project. That partnership dissolved in December 1991, and Keystone subsequently entered into a partnership with North Shore. Both Inner City and North Shore were strictly investment partners.

The EDRA granted Wisteria the exclusive right to prepare and submit a development proposal to the Department of Community Development (DCD) for approval. While the EDRA was in effect, DCD agreed not to solicit or negotiate other development proposals for the site. Under the EDRA, after a developer submits a proposal, DCD must review it within 15 working days. If it does not approve the submission, it must then indicate the reasons and give the developer 15 working days to resubmit its proposal. DCD had no obligation under the EDRA to accept a developer's proposal, and the agreement allows DCD to terminate the EDRA in its sole discretion. However, once it approved a proposal, it was required to seek authorizing legislation from the City Council allowing it to enter into a contract to sell the site, offer the developer a contract for the sale of the site and complete the contract within 21 days. Within 14 days of receiving the developer's executed contract and letter from a private lender, Seattle agreed under the EDRA to request legislation authorizing the Mayor and the City Comptroller to execute and deliver the contracts and deeds.

The EDRA is conditioned on the developer's prompt execution of the scope of work in the agreement and submission of the required documents, plans, reports and contracts within the time specified in the agreement. A developer is required to satisfy all the conditions of the agreement within 105 days of executing the EDRA. However, a developer "proceeding diligently and in good faith" may request 15-day extensions. The agreement contains a clause giving DCD sole discretion to terminate the agreement if the developer does not meet submission deadlines or DCD does not accept or approve its submission:

Should the Developer not meet [the] date of submission under this Agreement and no extension has been granted, or the Department does not accept or approve of a submission required by this Agreement, then the Department may in its sole discretion terminate this Agreement.

Wisteria made a number of submissions to Seattle. Although it is not entirely clear from the record how many extensions Seattle granted Wisteria, the EDRA did not expire by its own terms 105 days following its execution because Seattle did not terminate the agreement until 2 years after it was executed. At some point after the parties signed the EDRA, the development program was transferred to the Seattle Department of Housing and Human Services (DHHS). On February 19, 1992, Earl Richardson, the director of DHHS' Housing and Community Services Division, informed Randall Spaan of Wisteria that DHHS had accepted its most recent architectural concept for the parcels but that the review committee had several concerns about the project concept. This began a series of letters and meetings between Richardson and Spaan concerning modifications to the proposal, which culminated in an October 7, 1992, letter from Richardson terminating Wisteria's participation in the project.

On November 16, 1993, Wisteria sued Seattle for breach of contract. Seattle moved to dismiss the action for failure to state a claim. Judge Robert Lasnik denied the motion. Seattle moved for reconsideration and Wisteria moved to amend its complaint to add claims for specific performance and for breach of an obligation to act in good faith under the EDRA. Judge Lasnik granted both motions and dismissed Wisteria's breach of contract claim with prejudice. The order provided that Seattle could move for summary judgment of dismissal on the new causes of action. After Wisteria amended its complaint, Seattle moved for summary judgment on the new claims. Judge James McCutcheon granted Seattle's motion, ruling that the plaintiffs lacked standing to sue because there was no valid written assignment of the EDRA from Inner City to North Shore as required by RCW 4.08.080 and because the EDRA was a contract for personal service that could not be assigned without Seattle's consent. Wisteria appeals both Judge Lasnik's order dismissing its breach of contract claim under CR 12(b)(6) and Judge McCutcheon's orders granting Seattle summary judgment on its remaining claims and denying its motion for reconsideration.


Judge Lasnik dismissed Wisteria's first cause of action, which alleged a breach of a contract to sell parcel 8A/9, under CR 12(b)(6) for failure to state a cause of action. A trial court may grant dismissal for failure to state a claim under CR 12(b)(6) only if "'it appears beyond doubt that the plaintiff can prove no set of facts, consistent with the complaint, which would entitle the plaintiff to relief.'" Bowman v. John Doe, 104 Wash. 2d 181, 183, 704 P.2d 140 (1985) (quoting Orwick v. City of Seattle, 103 Wash. 2d 249, 254, 692 P.2d 793 (1984)). A plaintiff's factual allegations are presumed true for purposes of a CR 12(b)(6) motion. Lawson v. State, 107 Wash. 2d 444, 448, 730 P.2d 1308 (1986).

The trial court properly dismissed Wisteria's first cause of action. Although the parties had a contract to develop a proposal for parcel 8A/9 which contemplated its eventual sale to Wisteria, they did not have a contract for the sale of land. Wisteria has pointed to nothing in the EDRA that obligated Seattle to actually sell the parcel to it. Rather, any sale was conditioned on DCD (later DHHS) approving the site proposal and the City Council passing an ordinance authorizing the sale, neither of which occurred. Furthermore, the EDRA does not contain a legal description of the site or the purchase price. Thus, even assuming Seattle did agree to sell Wisteria the ...

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