Opinion
No. 21652-3-II.
August 21, 1998.
Appeal from the Superior Court for Pierce County, No. 94-2-12589-9, Waldo E. Stone, J., on January 10, 1997.
Charles K. Wiggins; and Keith A. Kemper of Ellis, Li McKinstry, for appellant.
Andrew L. Symons of Inslee, Best, Doezie Ryder, P.S., for respondents.
Ron Chow, pro se.
Paul Yuan sued Ron Chow to collect on a promissory note signed by Chow. Chow joined Jesse Tam, claiming that he signed the note on behalf of Tam, who actually received the funds. The trial court granted summary judgment for Tam, ruling that the action against Tam was based on an oral promise or agreement, which was barred by the three-year statute of limitations. The trial court also ruled that inconsistencies in Yuan's pleadings and testimony were fatal to his claim that the transaction was really for Tam's benefit. We reverse, holding that the action is controlled by the six-year statute of limitations for written agreements because the alleged agency between Tam and Chow is a separate factual inquiry and the inconsistencies in Yuan's evidence do not bar his claim. We also reverse an award of attorneys fees to Tam.
FACTS
In November 1994, Paul Yuan sued Ron Chow, claiming that Chow had "personally executed a promissory note" payable to Yuan in the amount of $50,000. The note, dated December 1, 1988, was signed by Chow and was payable in full on December 1, 1989. Yuan alleged that Chow had failed to make payments despite repeated demands. He sought a judgment against Chow for $50,000 plus interest.
With his answer, Chow filed a third party complaint against Jesse Tam. He alleged that Tam had induced Chow to borrow money from Yuan. He claimed that Tam, a vice president with Seafirst Bank, had authorized several bad loans and needed the money to pay them off in order to retain his job at the bank.
Jesse Tam's wife was also named in the complaint but for ease of reference we refer only to Jesse Tam.
Tam moved to dismiss Chow's third party complaint, arguing that the action was barred by the statute of limitations. See RCW 4.16.080(3). Tam claimed that any agreement between Chow and Tam was subject to the three-year statute of limitations, which applies to oral and partly oral contracts. Tam also claimed that he was entitled to attorney's fees under RCW 4.84.330 based on the attorneys fee clause in the promissory note.
In opposition, Yuan and Chow argued that the action is subject to the six-year statute of limitations under RCW 4.16.040(1), because the loan from Yuan to Tam was an express or implied liability arising out of a written contract, i.e., the promissory note. They explained that, because Tam was Yuan's personal banker, they used Chow as a middleman or agent for the loan so that Tam would not get in trouble with Seafirst. Chow approached Yuan with the idea for the loan because Chow had known Yuan longer and because Tam was not allowed to borrow funds from his clients. The three men met on December 1, 1988 to complete the transaction. Tam drafted the promissory note and issued a cashiers check for $50,000. Chow signed the note, endorsed the check, and gave both items to Tam. Tam deposited the check in an account on which he had signature authority. The next day, the funds were transferred to Tam's nephew. Yuan and Chow claimed that none of the proceeds went to Chow and that none of the debt had been repaid. The court denied summary judgment.
Tam then counterclaimed against Chow and cross-claimed against Yuan, alleging that the funds were obtained to repay Chow's debt to one of Tam's relatives. Tam also alleged (1) that Chow had made monthly payments on the note; (2) that when payments stopped, Yuan made repeated demands on Chow for payment; and (3) that Yuan had demanded and received a $25,000 credit on the loan from Seafirst Bank. Yuan then counterclaimed against Tam, alleging that all parties understood that the loan was for Tam's benefit. He requested damages in the amount of the unpaid principal and interest.
Chow's claim against Tam was dismissed for failure to respond to discovery requests. Tam then moved for summary judgment against Yuan, arguing that any agreement between Yuan and Tam was oral and, therefore, the claim was barred by the three-year statute of limitations. The trial court ruled that the three-year statute of limitations for oral contracts applied and granted summary judgment in Tam's favor. The court also based its ruling on inconsistencies in the facts alleged by Yuan and Yuan's partial recovery of $25,000 from Seafirst on the note. The trial court awarded Tam attorneys fees of $35,000.
Statute of Limitations
Yuan argues that the trial court should have applied the six-year statute of limitations because the action is on a written contract, i.e. the promissory note. We agree.
In reviewing a summary judgment, we engage in the same inquiry as the trial court. Wilson v. Steinbach, 98 Wn.2d 434, 437, 656 P.2d 1030 (1982). We must consider the facts and all reasonable inferences in the light most favorable to the non-moving party. Wilson, 98 Wn.2d at 437. Summary judgment should be granted only if the pleadings, affidavits, depositions, and admissions on file demonstrate the absence of genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Wilson, 98 Wn.2d at 437.
[1] The six-year statute of limitation applies to contracts in writing or express or implied liabilities arising out of a written agreement. RCW 4.16.040(1). An action upon a contract or an express or implied liability, that is not in writing and does not arise out of any written instrument must be brought within three years. RCW 4.16.080(3). "If parol evidence is necessary to establish any material element of the written contract, then the contract is partly oral and the three-year statute of limitations applies." Barnes v. McLendon, 128 Wn.2d 563, 570, 910 P.2d 469 (1996) (citing Cahn v. Foster Marshall, Inc., 33 Wn. App. 838, 840-41, 658 P.2d 42 (1983)).
Between the filing of the first summary judgment motion against Chow and the second summary judgment motion against Yuan, the Washington Supreme Court decided Barnes, 128 Wn.2d at 563, which controls the outcome of this case. Barnes was a client of the McLendon Kaiser law firm. After receiving a large damage award, Barnes wrote a check for $750,000 to his attorney, McLendon. In exchange, McLendon executed a promissory note in favor of Barnes. McLendon deposited some of the money into the law firm's operating account and made one payment on the loan out of the law firm account. Barnes, 128 Wn.2d 564-66. Almost six years after McLendon defaulted on the note, Barnes sued McLendon and two attorneys, Kaiser and Douglass, who practiced at the firm. Barnes claimed that the loan was a partnership debt because it was made for the purpose of purchasing office equipment. Barnes, 128 Wn.2d at 568.
Kaiser and Douglass moved for summary judgment, arguing in part that any contractual obligation they had was partly oral and, therefore, Barnes' action was barred by the three-year statute of limitations. Barnes, 128 Wn.2d at 568-70. The Supreme Court disagreed, holding that, for purposes of the statute of limitations, "once a written contract is established . . . it is a separate factual inquiry as to whether or not the contract benefited the partnership or was executed within the ordinary course of partnership business, thereby binding the partnership." Barnes, 128 Wn.2d at 572-73. In comparing the analogous case of Warren v. Rickles, 129 Wn. 443, 225 P. 422 (1924), the court said:
Despite the fact that the written contract did not indicate that other partners had liability on the contract, all of the partners were found to have liability arising out of their relationship as partners, the parol evidence merely establishing the partnership relationship between the defendants, not the terms of the contract.
Barnes, 128 Wn.2d at 572.
Tam attempts to distinguish Barnes. He argues that in Barnes there was no contention that the non-signing partners promised to pay the note and, therefore, proving the existence of a partnership was not dependent on proving an oral promise or agreement. But this mischaracterizes Yuan's claim. Yuan does not claim that Tam made an oral promise to pay him. Instead, Yuan argues that the agency relationship between Chow and Tam obligates Tam as the principal on the note. In essence, Yuan asserts that Tam used Chow as a go-between to get the loan: Chow was acting for and under the direction of Tam, and "all three men knew and intended the loan to be between Yuan and Tam." Tam points out that Yuan's attorney told the trial court, "Mr. Tam actually promised directly to Mr. Yuan to pay the money back, not a promise for indemnification, because he was the obligor on the note in the first instance." (Emphasis added.) But this statement does not suggest that Tam simply made an oral promise to pay Yuan. Instead, it indicates that Tam promised to pay Yuan because he was the obligor or principal on the note. This statement is, therefore, consistent with Yuan's argument that Chow acted as Tam's agent.
Tam characterizes the Barnes court as holding that the "non-signing members of a partnership were liable on a note signed by one of their partners." This is inaccurate because the court did not decide that issue. Instead, the court remanded the case for trial to determine whether the obligation on the promissory note extended to the partnership. Barnes, 128 Wn.2d at 573-75.
Tam also argues that Yuan is simply using the agency label to prove an oral promise. But on summary judgment, we view the evidence in the light most favorable to Yuan, the non-moving party Both Yuan and Chow alleged an agency relationship between Chow and Tam. Chow stated:
When this loan was made all three of us knew and intended that it was a loan to Jesse [Tam]. I agreed to help Jesse only because I was a closer friend of Paul's and because Jesse did not want his name anywhere on the documents evidencing the loan. However, everything I did with regard to this transaction I did for Jesse with his knowledge and approval or under his direction.
Because the existence of an agency relationship is a separate factual inquiry, apart from the terms of the promissory note, the trial court erred in dismissing Yuan's claim under the three-year statute of limitations applicable to oral contracts.
Inconsistent Actions and Representations by Yuan
Tam also argues that Yuan's agency theory cannot be reconciled with the facts. Citing Davis v. Bafus, 3 Wn. App. 164, 167, 473 P.2d 192 (1970), he contends that filing suit against Chow personally was inconsistent with Yuan's later claim of an agency relationship, because an agent for a disclosed principal cannot be held liable on the note. Tam also points to the following inconsistencies: (1) Chow personally signed the note; (2) from inception Chow made monthly payments on the note; (3) when payments stopped, Yuan repeatedly demanded payment from Chow; (4) Chow made 15 to 20 more payments on the note; and (5) Yuan collected $25,000 from Seafirst based on his attorneys representation that a loan was made to Chow.
At trial, Tam, citing Chapman v. Ross, 152 Wn. 262, 267, 277 P. 854 (1929), argued that "where a party pursues the agent on a claim, he thereby is barred from pursuing the principal." As Yuan, points out, Chapman and the doctrine requiring the plaintiff to elect his remedy was abrogated in Crown Controls, Inc. v. Smiley, 110 Wn.2d 695, 756 P.2d 717 (1988). But Tam asserts that Crown Controls is inapplicable because it dealt with the liability of an agent for an undisclosed principal. Yet, Tam falls to explain why Chapman, if it is still good law, applies to the facts of this case.
The Supreme Court dealt with a similar issue in Barnes. Kaiser and Douglass argued that Barnes had not raised a genuine issue of material fact as to whether the partnership was obligated on the note. They argued (1) that Barnes had signed a statement absolving Kaiser and Douglass of any obligation on the note and (2) that Barnes made inconsistent statements at his deposition, indicating at times that the loan was personal to McLendon and at other times that the entire firm was obligated on the debt. Barnes, 128 Wn.2d at 574 n.6. The court rejected the argument because the evidence, when viewed most favorably to Barnes, was sufficient to create a question of fact as to the partnership obligation. Barnes, 128 Wn.2d. at 575.
[2] Although there are inconsistencies in Yuan's version of events, when viewed most favorably to Yuan, the evidence is sufficient to create a factual dispute as to whether Chow acted as Tam's agent in signing the note. Yuan's position is that he always understood that the loan was for Tam's benefit. Chow came to him and told him that their mutual friend Tam was in trouble with the bank and needed help to save his job. All three men met in Tam's office and Chow signed the promissory note that Tam had drawn up. Tam issued a cashiers check, which Chow endorsed and gave to Tam. They used Chow as a middleman to keep Tam's name off the loan documents. Chow's declaration supports this version of events.
It is undisputed that Chow made payments on the loan. Chow explained in his deposition that he felt obligated to make payments to Yuan because he was the deal-maker. He said, "[s]o its a note, its an obligation, and its our tradition: we honor our debts." He said that he "reaffirm[ed]" the debt to Yuan because he believed Tam would "take care of his obligation eventually" Moreover, Yuan asserts that when payment was not made on the account, he made at least nine demands on Tam for payment and told him, "You better take care of this for me."
[3] Tam makes much of a letter that Yuan's attorney wrote to Seafirst five years before filing suit. In the letter, Yuan's attorney said, "Mr. Tam induced Mr. Yuan to draw $50,000 against Mr. Yuan's private banking credit line . . . to make a loan to Mr. Ron Chow. This loan was to have enabled Mr. Chow to reduce his loan balance with Seafirst Bank." But an attorneys statement is not binding upon his client unless it is "`distinct and formal, and made for the express purpose of dispensing with the formal proof of some fact at the trial.'" Hogenson v. Service Armament Co., 77 Wn.2d 209, 214, 461 P.2d 311 (1969) (quoting State v. Wheeler, 93 Wn. 538, 541, 161 P. 373 (1916)). In addition, Yuan's attorney wrote Seafirst eight months later: "As we have indicated to you in the past, this loan has been a continual headache for Paul. He did it as a favor to Jesse [Tam] to help Jesse hang on to his job because of some bad loans he had written, including one to Ron Chow."
These facts are sufficient to survive a motion for summary judgment. Whether Yuan's versions of events is believable, in light of the inconsistencies, is for the trier of fact to decide. See Balise v. Underwood, 62 Wn.2d 195, 200, 381 P.2d 966 (1963); Tabak v. State, 73 Wn. App. 691, 696-97, 870 P.2d 1014 (1994); see also Barnes, 128 Wn.2d at 573-75.
A majority of the panel having determined that only the foregoing portion of this opinion will be printed in the Washington Appellate Reports and that the remainder shall be filed for public record pursuant to RCW 2.06.040, it is so ordered.
HOUGHTON, C.J., and MORGAN J., concur.