Appeal from Superior Court of Snohomish County. Docket No: 94-2-00155-6. Date filed: 05/05/95. Judge signing: Hon. Joseph Thibodeau.
Petition for Review Denied July 8, 1997,
Authored by Walter E. Webster. Concurring: William W. Baker, Susan R. Agid.
The opinion of the court was delivered by: Webster
WEBSTER, J. -- A party seeking contract damages must prove the existence and breach of a contract. Further, when the contract is oral, the statute of frauds may bar its enforcement. Here, Sturlaugson was the Johnsons' tenant, living in a farmhouse on the northeast corner of twenty acres of the Johnsons' land. He eventually sued them, contending they agreed to sell him approximately five acres of land, including the land on which the farmhouse sits, for $45,000. The trial court found that the Johnsons had orally promised to convey the land, and had beached the promise, entitling Sturlaugson to $255,000 in damages. The Johnsons appeal, arguing that the transaction is barred by the statute of frauds. Second, they contend that the terms of the alleged contract are so uncertain so as to preclude a damages award. Because Sturlaugson's possession of the property changed in nature from that of a tenant to an owner, and because he made permanent improvements worth $167,500 in pursuance of the contract to convey, his part performance takes the transaction outside the reach of the statute of frauds. Furthermore, the parties agreed on price, size of the parcel, location, closing, insurance and real estate taxes. Hence, despite the absence of a legal description for the property to be conveyed, Sturlaugson can recover in damages for breach of contract. We affirm the trial court's judgment.
In August 1966 the Johnsons purchased 66 acres of land in Snohomish County. They set aside the east twenty acres (determined at trial to be 21.3 acres) for their four children, intending to short plat it into five acre lots (the size reflected then existing zoning requirements). The northeast corner of the twenty acres included an old barn, a dilapidated chicken coop, and a pasture. Although the Johnsons leased the farmhouse to a third party, they intended that part of the twenty acres for their daughter, Lynn, who was a horse trainer.
Ivan Sturlaugson, a blacksmith and horse trainer, began renting that farmhouse between 1979 and 1981. He paid $225 per month in rent. In 1982, Sturlaugson married the Johnson's daughter, Lynn. They lived in the farmhouse, and the Johnsons added a carport and a laundry room. The Johnsons deducted the expenses on their tax returns, as landlord expenses.
Around the same time, the Johnsons applied for an open space farm classification which gave the twenty acres favorable tax treatment. The Johnsons expected the classification to expire between 1990 and 1993.
In 1983, Ivan and Lynn Sturlaugson began looking for property to purchase. But late that year they agreed with the Johnsons that they would continue living on the Johnsons' farm. In 1983 or 1984, the Johnsons agreed to sell the Sturlaugsons part of the twenty acres, an agreement that the trial court described as "evolving":
The agreement was an evolving contract, and ultimately included a knoll where the Sturlaugsons intended to build a new home. The only price discussed among the parties was $45,000.00. The precise area was not agreed to, but it was between 5.0 and 5.3 acres, the former figure being the minimum lot size under zoning and the latter figure being of the 21.3 acre farm.
The Johnsons indicated that the transaction would close when the open space classification expired. In order to ensure that the property would stay in the Johnson family, they retained a right to purchase the property should the Sturlaugsons decide to sell. The Johnsons also received permission to continue using property adjacent to the old barn to store a truck and some equipment. The Sturlaugsons quit looking for other property to purchase. The Johnsons told one close friend that they had sold the property to the Sturlaugsons for $45,000, and told another that they were "selling the kids the place real reasonable."
The Sturlaugsons continued to pay $225 per month and designated he payment as rent on their checks and their tax returns. They wanted their accountant to deduct the payments as interest payments, telling him that they were purchasing the property. But the accountant felt that such a deduction, without documentation relating to the sale, risked heavy penalties should an audit occur.
Between 1983 and 1990, the Sturlaugsons completed numerous substantial renovations and new additions to the property. The Johnsons assisted with planning, and did some work. Still, the Sturlaugsons spent $50,000 in materials alone, and an expert at trial valued the improvements at $167,500. The Sturlaugsons depreciated their expenses as "owners," although the depreciation schedule for tenants was initially more favorable. The Sturlaugsons paid the property taxes from 1986 through 1992, and also insurance during a similar period of time.
In 1992, Lynn Sturlaugson moved off the property, separating from Ivan. In the subsequent dissolution, she and the Johnsons contended that the Sturlaugsons were simply month-to-month tenants. At the Conclusion of that proceeding, the court award Ivan the interest in the alleged oral contract to convey the property. Ivan Sturlaugson sued the Johnsons, alleging that they orally promised to sell the Sturlaugsons the property and that they had breached the contract. The Johnsons defended the lawsuit, arguing that no contract existed, and if one did, the statute of frauds precluded its enforcement. After an eight day trial, the court entered detailed findings and Conclusions on the court's pleading paper. It found the existence of an oral agreement, and that Sturlaugson's part performance removed the bar of the statute of frauds. It awarded $255,000 in expectancy damages, figuring that the property is worth $300,000 and Sturlaugson promised to pay $45,000. The Johnsons appeal, although they do not assign error to any factual findings.