BERGQUIST v. ELLS, 27628-3-II (Wash.App. 8-30-2002)

No. 27628-3-II.The Court of Appeals of Washington, Division Two.
Filed: August 30, 2002. DO NOT CITE. SEE RAP 10.4(h). UNPUBLISHED OPINION.

Appeal from Superior Court of Kitsap County, No. 99-2-03089-5, Hon. Thomas J. Majhan, June 20, 2001, Judgment or order under review.

Counsel for Appellant(s), Isaac A. Anderson, Buskirk Law Offices, Ste 200, 3473 N.W. Lowell St, Silverdale, WA 98383-7808.

Counsel for Respondent(s), Thomas C. O’Hare, Smith O’Hare, P.O. Box 68, Silverdale, WA 98383-0068.

J. ROBIN HUNT, C.J.

Thomas Bergquist appeals the trial court’s dismissal of his action against James and Molly Ells and IPS International, Inc., based on a written business agreement to secure a loan from Bergquist to IPS.

The trial court ruled that the Ells signed the agreement solely on behalf of IPS and, thus, they are not personally liable to Bergquist. The Ells cross-appeal the trial court’s partial summary judgment holding IPS liable to Bergquist for money he loaned to the corporation; they argue that the loans were not yet due and payable. Agreeing with the trial court that IPS, not the Ells, is liable to repay Bergquist’s loan immediately, we affirm.

FACTS I. The Agreement
On February 5, 1999, the Ells and Bergquist executed a two-page agreement comprising Ells’ typed questions and Bergquist’s handwritten responses. The agreement gave Bergquist the right to purchase for $1.00 a 25 percent interest in the Ells’ closely held corporation, IPS.

The agreement further provided that Bergquist would loan [money] from personal sources [at] 8% [interest] until I can get proper lines of credit into place to replace me. Organiz[e] a growth path to the promise[d] land. Handl[e] all financial issues with attorneys, banks accountants. Do true tracking.

Exhibit 1.
Bergquist acknowledged that he would be responsible never [to] allow $ to be an issue, be creative, take all $ pressures issues off your back so you 2 can sell manufacture!
. . .
Til we sell-out or go public take a trip to Bora Bora.

Exhibit 1.[1]

The last paragraph of the agreement provided:

All parties agree to terms on reverse of Tom Bergquist’s option to buy 25% ownership in I.P.S. International from Jim Molly Ells in spirit plan to have said agreement drawn up by an attorney as soon as reasonably possible. This is the agreement in spirit and not subject to final draft by attorney.

Exhibit 1.

Three signature lines were drawn under this paragraph; each of the three parties signed his or her name on a line with that individual’s name printed below.

Under this agreement, Bergquist loaned funds to IPS[2] by issuing checks payable to IPS. As IPS realized income, it repaid portions of the debt to Bergquist with IPS’ corporate checks.

II. Dispute
In June 1999, Bergquist obtained a financial report showing that between February and June 1999, the Ells had taken personal draws of $35,500 from the IPS account. Bergquist believed that this amount was $17,500 more than the parties had verbally agreed would be Jim Ells’ salary.

Bergquist confronted the Ells, and the parties’ relationship disintegrated. Jim Ells denied taking more salary than agreed. Molly Ells refused to make the next loan repayment to Bergquist. And Bergquist refused to loan IPS additional money.[3]

III. Litigation
Bergquist sued Ells and IPS for breach of contract. The trial court granted in part and denied in part Bergquist’s motion for partial summary judgment. The court ruled that Bergquist’s loans to IPS were due and payable as of April 20, 2001, in the amount of $65,795.51.[4] But the court denied Bergquist’s motion for summary judgment on the issue of the Ells’ personal liability for the amount due, and that issue went to trial.

After Bergquist presented his case, the Ells moved to dismiss based on lack of evidence that they had agreed to be personally liable on the loans.

The court granted the Ells’ motion, relying heavily on the statute of frauds (RCW 19.36.010) requirement that every promise to pay a debt of another must be in writing. The trial court further held that (1) parol evidence could not establish such an essential element of the agreement; and (2) there was no `verbage [sic] on the face of that document from which the Court could conclude that the Ells agreed to guarantee the indebtedness of IPS International, Inc.’ Clerk’s Papers at 47. The trial court denied Bergquist’s motion for reconsideration.

Bergquist appeals the trial court’s summary judgment dismissal of his action against the Ells. The Ells cross-appeal the trial court’s grant of summary judgment ruling that Bergquist’s loans are due and payable by IPS.

ANALYSIS I. Dismissal of Bergquist’s Action A. Insufficient Evidence that Ells Agreed to be Personally Liable
A court should dismiss an action for failure to state a claim only if it appears that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief. Rossiter v. Moore, 59 Wn.2d 722, 724, 370 P.2d 250 (1962). Thus, the issue here is whether Bergquist’s testimony (his whole case), viewed most favorably to his position, provided any basis upon which the trial court could find that the Ells agreed to be personally liable to Bergquist for IPS’ debts, as Bergquist claimed.[5]

Bergquist testified that he chose to loan money to IPS, rather than invest in it, because he feared that IPS had insufficient assets to secure his investment. He set forth the terms of his proposal, along with his answers, on the two-page document that Ells provided. The parties agreed to Bergquist’s proposal, then signed their names on the lines on the reverse side. Bergquist said that he had prepared the parties’ personal names under the signature lines without reference to IPS because `it was a personal obligation. It was both in my mind.’ Report of Proceedings at 19.

Bergquist further explained that he understood the difference between a corporate and a personal obligation and that he would not have entered into the agreement without making the Ells personally liable. Because he knew there was no value in the corporation, he wanted to establish that the Ells had personal assets. So he had asked them, `What’s your house worth? How much did you put down? What is your boat worth?’ Report of Proceedings at 19.

The burden of proving a contract is on the party asserting it, and he must prove each essential fact, including the existence of a mutual intention. Am. States Ins. Co. v. Breesnee, 49 Wn. App. 642, 646, 745 P.2d 518 (1987). The unexpressed intention of one party is meaningless as to the mutual intention of the parties. Am. States, 49 Wn. App. at 646. Bergquist testified extensively as to his intent and understanding, but he presented no clear evidence that such understanding and agreement was mutual and shared by the Ells.

Rather, the parties’ self-prepared written agreement was unconventional and unsophisticated. It did not state that the Ells would be personally liable on the IPS debt. Moreover, other than Bergquist’s unilateral beliefs as to the Ells’ personal obligation, there was no evidence that the Ells had acknowledged or agreed that they would be personally liable. Even viewing Bergquist’s testimony most favorably to him, he did not provide the court any basis upon which it could find that the Ells agreed to be personally liable for the IPS debt. Thus, Bergquist failed to state a claim upon which relief could be granted, and the trial court properly dismissed his action against the Ells.

B. Wilson
Bergquist contends that Wilson Court Ltd. P’ship v. Tony Maroni’s Inc., 134 Wn.2d 692, 700, 952 P.2d 590 (1998), controls the issue of personal liability of an individual who signs an agreement and that, under Wilson, Ells is personally liable to repay Bergquist’s loans to IPS. We disagree.

In Wilson, a corporate president signed a commercial lease and contemporaneously executed a guaranty agreement, on which he signed his name and wrote `President’ after his name on the signature line. The issue in Wilson was whether a guaranty of a commercial lease signed by the president of a corporate tenant was enforceable against the president personally, although he signed the guaranty in a representative capacity. All of the cases cited and relied on in Wilson involved personally signed separate guaranties ensuring a corporation’s performance on a contract. See Wilson, 134 Wn.2d at 701-06. Such is not the case here. Here, there was no separate guaranty. Nor did the Ells follow their signatures on the agreement with any descriptive corporate words such as `President,’ as in Wilson. Moreover, unlike the present case, the parties in Wilson (and in the cases on which Wilson relies) agreed that they had intended and executed a personal guaranty for the corporation’s loan.[6] In contrast here, there is no evidence, beyond Bergquist’s bare allegations, that the Ells agreed to be personally liable for their corporation’s debt to Bergquist. Thus, Wilson does not apply.

II. Summary Judgment — Loan Due Date
We review a grant of summary judgment de novo, engaging in the same inquiry as the trial court. Trimble v. Washington State Univ., 140 Wn.2d 88, 92, 993 P.2d 259 (2000). Summary judgment is appropriate if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Trimble, 140 Wn.2d at 93; CR 56(c). After the moving party has submitted adequate affidavits, the nonmoving party must set forth specific facts rebutting the moving party’s contentions and disclosing the existence of issues of material fact if it is to defeat summary judgment. Marshall v. Bally’s Pacwest, Inc., 94 Wn. App. 372, 377, 972 P.2d 475 (1999). We consider all facts and all reasonable inferences in the light most favorable to the nonmoving party, the Ells. Trimble, 140 Wn.2d at 93.

`The motion should be granted only if, from all the evidence, reasonable persons could reach but one conclusion.’ Clements v. Travelers Indem. Co., 121 Wn.2d 243, 249, 850 P.2d 1298 (1993) (citing Wilson v. Steinbach, 98 Wn.2d 434, 656 P.2d 1030
(1982)). However, bare assertions that a genuine material issue exists will not defeat a summary judgment motion in the absence of actual evidence.

Trimble, 140 Wn.2d at 93.

The Ells do not contest that IPS is liable for the amounts owing on Bergquist’s loans. Rather, they argue that summary judgment was inappropriate because there remains a material issue as to when these loans were `due and payable.’ They claim that

(1) the loans were not due and payable until IPS had sufficient cash on hand to repay them; (2) IPS would have such cash only when Mr. Bergquist had infused sufficient funds into the corporation to permit it to grow and become profitable and/or when he had found a bank or other financial institution to provide the corporation a loan or line of credit sufficient to pay him off. (Clerk’s Papers at 266); and (3) this event had not yet occurred.

Bergquist counters that

(1) the agreement contains no specific repayment terms for his loans to IPS; (2) IPS did not dispute that its relationship with him had ended when it stopped payments to him from sales income; (3) IPS did not dispute that it owed him the money; and (4) the trial court properly supplied the due date for the loans.

A. Course of Conduct
The written agreement contained only two provisions, authored by Bergquist, for repayment of the loans. One provided that Bergquist would loan money at eight percent interest `until I can get proper lines of credit into place to replace me.’ Exhibit 1. The other provided:

If you feel I’m a big mistake I’m not doing what is stated here, have a heart to heart by 3-5-99. If not resolved, I’ll relinquish my option for payment in full of any funds loaned @ 24% interest provided paid in full by 5-1-99.

Exhibit 1. The agreement did not address when the loans would be due if the relationship lasted beyond these dates.

Nonetheless, the record shows that Bergquist continued to provide and IPS continued to repay loans beyond those dates. The parties began and continued a course of conduct in which Bergquist loaned funds to IPS to pay its current bills whenever Molly Ells called him. IPS issued repayment checks to Bergquist to pay down the line of credit whenever IPS received income.[7] According to Bergquist, `At no time was I ever requested money that I did not provide to the Ells, period.’ Report of Proceedings at 28.

B. The Ells’ Breach
The Ells abruptly ended this pattern of loan and repayment after IPS received a $38,000 sale payment that the parties had been anticipating, but it failed to repay Bergquist. Bergquist asked Molly Ells why she had not deposited a repayment check in Bergquist’s account. Molly Ells responded, `We decided we’re not going to do it. We are not going to pay the line down with it.’ Report of Proceedings at 38. When Bergquist replied, `Well, that’s the agreement we have had,’ she said, `No, we changed our mind. We are not going to do it. We feel more comfortable with it just sitting here in savings.’ Report of Proceedings at 38.[8]
Bergquist then placed multiple calls to Jim Ells, but Ells did not return his call.

C. Court-Supplied Due Date
The Ells argue on appeal that summary judgment was inappropriate because the loans were not `due and payable.’ In his deposition, Jim Ells testified as follows:

Q. Did you, at that point, decide not to make anymore payments on the loan?
A. No, absolutely not. I never have decided not to make a payment.
Q. Well, your last payment on the loan was in May of 1999, correct?
A. Correct. I had not had money to make the payment. And that bothers me.
Q. Is that the only reason for not making payments after that date, was because you didn’t have the money to do that?
A. Strictly a lack of funds.

Clerk’s Papers at 256 (emphasis added). He did not testify that IPS failed to repay the loan because it was not `due and payable.’ The Ells offered no further proof that IPS possessed insufficient funds to make the repayment that Bergquist was expecting in May 1999, nor do they deny that IPS received the $38,000 sale payment in spring 1999.

The nonmoving party may not rely on speculation or argumentative assertions that unresolved factual issues remain to defeat a summary judgment motion. Marshall, 94 Wn. App. at 377. Affidavits of a non-moving party that fail to support all elements of the non-moving party’s claim are also inadequate. See Olympic Fish Products, Inc. v. Lloyd, 93 Wn.2d 596, 602, 611 P.2d 737 (1980). But such is the case here. At most, Ells offered only a bare assertion that there was `a lack of funds.’ And this unsupported assertion does not defeat Bergquist’s motion for summary judgment, especially where he offered uncontradicted evidence that IPS had received substantial funds that it could have used to repay him had the Ells not unilaterally decided to retain the money in the corporation.

The trial court did not err in granting summary judgment where the Ells did not deny that IPS owed the money, did not contest the amount that Bergquist alleged was outstanding, did not deny that IPS had received a $38,000 payment shortly before refusing to make an expected repayment to Bergquist, and did not deny that they had previously followed a pattern of borrowing from Bergquist and making repayments after IPS received sales payments. Where the parties have adequately manifested an intent to create a specific contract, the trial court may supply a missing term.[9]
See Pepper Tanner, Inc. v. KEDO, Inc., 13 Wn. App. 433, 435, 535 P.2d 857, review denied, 86 Wn.2d 1003 (1975). Here, the parties’ actions manifested their intent that Bergquist continue to lend money to IPS and that IPS continue to repay Bergquist as revenues came into the corporation. When the Ells unilaterally stopped this ongoing arrangement, the trial court properly supplied the missing repayment term in ruling that the outstanding loans were due and payable as of the judgment date.

Affirmed.

A majority of the panel having determined that this opinion will not be printed in the Washington Appellate Reports, but will be filed for public record pursuant to RCW 2.06.040, it is so ordered.

WE CONCUR: SEINFELD, J., HOUGHTON, J.