The opinion of the court was delivered by: J. MARTEN, Judge
This matter comes before the court on the defendants' Motion
for Summary Judgment (Dkt. No. 101), defendants' Motion for
Reconsideration (Dkt. No. 108), and plaintiffs' Motion to
overrule objection to pre-trial order and/or to amend pleadings
(Dkt. No. 112). After reviewing the briefs, the court grants
defendants' Motion for Summary Judgment and denies the remaining
motions as moot.
Plaintiff Steve Stein (age 54) and defendant Greg Stein (age
52) are natural brothers. For most of his working life, Steve has
been a career banker in Kansas. Since 1995, Greg has been a real
estate developer in the Seattle, Washington area.
A. Prior Real Estate Developments in Washington
By the beginning of year 2000, Greg had already done several
real estate developments in Seattle, two of which 120 Aloha Associates LLC (hereafter
"Aloha") and 2840 Madison Street Associates LLC, both Washington
limited liability companies (hereafter "LLC") Steve and his
wife Joleen participated in as investors. On Aloha, the two
couples were accompanied by Sharon's brother, Lindsey Woolf, and
his wife, Amy. None of the capital contributed in Aloha was
returned to the "investors" until after the completion of the
development and sale of the units.
There was another project prior to 2000, the 1005 Fifth Avenue
Project, which Steve and Joleen declined to participate in
because they felt it too risky. There was also a project, the
"Timber Deal," which Steve and Joleen declined to participate in
as equity investors but agreed to loan Greg money for use. On the
projects in which plaintiffs were involved as equity investors,
which included Aloha, the relationship of the parties was defined
in a written LLC operating agreement. On the projects for which
plaintiffs were lenders, as in the case of the Timber Deal, there
were no promissory notes, no security agreements, no collateral
pledged, no terms specifically negotiated and no basic
documentation of any kind. In fact, there has never been any
documentation for a loan from Steve to Greg.
B. Meridian Town Center Development
In January 2000, Greg, through his development entity, Western
Front Development, Inc., (hereafter "WFDI") signed a purchase
agreement for the purchase of a partially-begun shopping center
development in the State of Washington known as Meridian Town
Center (hereafter "MTC"). He believed the purchase to be a good
opportunity because a recent appraisal on the project valued the
land at $9 million whereas he could acquire it under the purchase
agreement for under $6 million, and there were safety nets in the
form of offers that existed to purchase portions of the land. The project as it then existed had numerous
liens, had been a failure with prior development efforts by
others, and had many issues to be overcome prior to a successful
Because of the opportunity, Greg invited his brother, Steve, to
participate in MTC. Steve visited Seattle and the site of the
development, and talked to people familiar with the project. He
declined to invest with Greg. The parties disagree as to the
exact reasons why.
The parties at this juncture dispute what factually happened
next. After Steve and Joleen declined to be equity investors,
Greg contends that he offered to personally guarantee the return
of plaintiffs' money, if Steve and Joleen would be lenders.
Plaintiffs agree that Greg offered to guarantee their money but
contend their role was nevertheless as equity investors. Greg
contends that Steve agreed in February or March 2000 for himself
and Joleen to be a lender of a portion of the funds necessary to
acquire the land; plaintiffs, on the other hand, deny they were
ever lenders and claim they were "equity investors" from the
outset. Plaintiffs claim they based their decision to invest on a
"proposal" received from Greg on April 7, 2000, which they
believe were the terms and conditions of the agreement under
which plaintiffs would be equity investors in the MTC project and
allow their net worth to be utilized to obtain the loans to
purchase the real property where MTC was located. Plaintiffs
claim that in early May 2000 they accepted the written offer
outlined in the April 7, 2000 fax and attachment.
C. The "Written Contract"
Plaintiffs assert that Greg sent them a fax on April 7, 2000,
denominated "Investor Proposal" which contained all of the terms
essential to an agreement and that they accepted the proposal
thereby forming a binding, enforceable "written contract."
However, while plaintiffs assert in this lawsuit that the relationship in this case is
based upon a written contract, in their recent deposition they
acknowledged that part of the "agreement" was oral and part
contained in the written April 7, 2000 "proposal." Plaintiffs,
however, contend that the oral portion is not inconsistent or
different in any manner than those terms of the written April 7,
2000 agreement. Steve has testified that he reversed his earlier
decision not to get involved and "accepted" this April 7, 2000
"proposal" upon receipt of it; Joleen Stein testified that she
"accepted" the proposal to be an "equity investor" on May 4,
D. $1.4 Million Wired to Seattle
Plaintiffs borrowed $1.4 million from Bank of Tescott, Salina,
Kansas and the funds were wired to the defendants on May 4, 2000.
The land transaction closed on May 9, 2000. Of that $1.4 million,
$425,000 of it was returned to plaintiffs by Greg on May 9, 2000
five days later because the money was not needed to close on
the land acquisition. The bulk of the purchase price came from a
loan defendant PL West, LLC (hereafter "PL West") obtained from
Washington Capital in the amount of $5 million.
E. Accrual of Plaintiffs' Cause of Action
Regardless of any other conflicting factual assertions, it is
undisputed that Steve and Greg had a face-to-face meeting a year
later in Steve's office in Salina, Kansas, in mid-May, 2001 where
the brothers had a heated argument.
At a minimum, Steve has testified that at the May 2001 meeting,
the argument was precisely over whether Steve and Joleen were
lenders or equity investors and the issue that has led to this
lawsuit was fully joined. Greg asserted unequivocally that
plaintiffs were lenders only; Steve asserted they were equity
investors. Plaintiff contends that in a December 18, 2002 email Greg acknowledged Steve's interest as equity investors
stating in an email "Relative to Steve's interest in the
development, we have yet to finalize his
participation/receivable. Tax returns that have been filed do not
indicate he has an ownership position, however, you can be
assured he has no liability or involvement other than the note at
the Bank of Tescott that we have been discussing." Dkt. No. 109,
Exhibit H, at p. 59. Also in a July 19, 2003 email Greg sent to
Steve, Greg noted that Steve wanted to formalize his interest in
the deal but Greg advised, "[o]n several occasions when you have
indicated we needed to formalize your interest in the deal, I
have asked you to provide a draft of what you are looking for."
Dkt. No. 109, Exhibit 5, at pp. 12.
Steve testified that they left the meeting with these opposite
positions. And, those positions haven't changed. Plaintiffs also
note that there is no written communication prior to May 1, 2001,
in which Greg indicated that plaintiffs' position is anything but
that of an equity owner.
It is undisputed when Steve and Greg had their heated exchange
in May 2001, Steve gave Greg an ultimatum: "I told him if that's
your interpretation of where we're at and what's going to happen,
then I was calling the loan. I want to be paid off immediately.
If he intended us to be lenders, we had never negotiated any
terms, any maturity date, nothing had ever been talked about a
loan to that point in time. If that was the position he was going
to take, then I said go find another lender and pay us off."
Plaintiffs have testified that the $1.4 million they "invested"
in the project was entirely a "capital contribution" and that it
would be left in the project as needed by Greg. Plaintiffs
expected their money to be left in the project "until the
investment was either ...