Opinion ID: 2463551
Heading Depth: 2
Heading Rank: 2

Heading: Warranty To Defend

Text: ¶ 13 Statutory warranty deeds are governed by RCW 64.04.030 and include a covenant to defend against another's claim to title. In relevant part, the statute states that [the grantor] warrants to the grantee, his heirs and assigns, the quiet and peaceable possession of such premises, and will defend the title thereto against all persons who may lawfully claim the same. RCW 64.04.030 (emphasis added). The covenant to defend is obligatory upon any grantor... as fully and with like effect as if written at full length in such deed. Id. Where covenants under the warranty deed are breached, an injured grantee is entitled to recover both damages for lost property or diminution in property value and attorney's fees incurred in defending title. Mastro v. Kumakichi Corp., 90 Wash.App. 157, 163, 951 P.2d 817 (1998) (citation omitted). Kiss sold the Popchois a plot of residential real estate pursuant to a statutory warranty deed. ¶ 14 There is little Washington case law interpreting the covenant to defend in the statutory warranty deed. The leading cases on point involve questions of the sufficient notice or tender of defense to the grantor necessary to make the grantor liable for attorney fees incurred by the grantee in the course of defending title to the property. See Mellor v. Chamberlin, 100 Wash.2d 643, 648-49, 673 P.2d 610 (1983); Mastro, 90 Wash.App. at 164-66, 951 P.2d 817. The central question in this case is whether the duty to defend is satisfied by a settlement conceding a third party's claim to title and payment of damages for the value of the portion by which the title is diminished to the grantee for the breach of warranty. Neither Mastro nor Mellor addresses the scope of the grantor's duty to defend. ¶ 15 Based on a plain reading of the statute and the implied duty of good faith, we hold that the warranty to defend means that, upon proper tender, a grantor is obligated to defend in good faith and is liable for a breach of that duty. The plain meaning of defend means something more than complete concession to another party's claim. BLACK'S LAW DICTIONARY 482 (9th ed. 2009) (defining to defend as [t]o deny, contest, or oppose (an allegation or claim)). An interpretation of the warranty to defend that includes mere concession to another's claim to title, regardless of the merits, would render the warranty to defend superfluous in the statute. A grantee can already recover for the diminished title under the warranties that the estate is free from all encumbrances and of quiet and peaceable possession of [the] premises. RCW 64.04.030. The duty to defend must mean something more. This is especially important in light of the unique character of real property because the tract of land, title to which needs defending, may be of greater value to the grantee than its monetary value reflects. [1] See Cornish Coll. of the Arts v. 1000 Virginia Ltd. P'ship, 158 Wash.App. 203, 222, 242 P.3d 1 (2010) ([B]ecause land is unique and difficult to value, specific performance is often the only adequate remedy for a breach of contract regarding real property.), review denied, 171 Wash.2d 1014, 249 P.3d 1029 (2011). Finally, an implied covenant of good faith inheres in every contract. Miller v. Othello Packers, Inc., 67 Wash.2d 842, 844, 410 P.2d 33 (1966). The duty of good faith requires faithfulness to an agreed common purpose and consistency with the justified expectations of the other party. RESTATEMENT (SECOND) OF CONTRACTS § 205 cmt. a (1981); see id. cmt. d ([B]ad faith may be overt or may consist of inaction.). As with any covenant of any contract, we read a duty of good faith into the warranty to defend. Accordingly, the promise that a grantor will defend against all other claims to title must mean something more than that the grantor will do nothing but concede such claims. ¶ 16 Kiss breached his duty to defend in good faith. The contract between Kiss and the Popchois included a warranty to defend against another's claim to title by reference to the fact that the sale of land was pursuant to a statutory warranty deed. When the Edmonsons filed their claim, the Popchois sent a tender of defense to Kiss. Kiss conditioned his acceptance of the tender on his right to control the defense, including settling the case without putting on any defense. This condition of acceptance effectively rendered his response a refusal of the tender. Cf. Mastro, 90 Wash.App. at 166, 951 P.2d 817 (assuming that failure to respond to a tender of defense constitutes a refusal to defend). Kiss now argues that this case is about control over the defense strategy and that a grantee cannot control the defense after issuing a tender of defense to the grantor. However, a concern about micromanagement is a far cry from the facts of this case where Kiss immediately sought to concede and settle the claim, without any evident consideration of the merits, because it would be most cost effective for him. Such indifference to the dispute and out-of-hand dismissal of the duty to defend simply cannot be characterized as satisfying the warranty to defend. Rather, Kiss's refusal to defend in good faith constitutes a breach of warranty. ¶ 17 At the crux of Kiss's argument that he did not breach his warranty to defend is a distinction between a duty to defend and a right to defend. He argues that the statutory warranty deed provides only that a grantor has the right to defend. The statute, however, does not contain language about a right; rather, it provides that the grantor  will defend the title. RCW 64.04.030 (emphasis added). The language of a right to defend appears in case law but does not support Kiss's interpretation. See, e.g., Mellor, 100 Wash.2d at 648, 673 P.2d 610; Mastro, 90 Wash.App. at 165, 951 P.2d 817 (quoting Dixon v. Fiat-Roosevelt Motors, Inc., 8 Wash.App. 689, 692, 509 P.2d 86 (1973)). In Mellor, this court stated: RCW 64.04.030 expressly states the grantornot the granteewill defend title against third persons. Whether a covenantee is successful at defending title is irrelevant, as the right to defend statutorily lies with a covenantor. 100 Wash.2d at 648, 673 P.2d 610. Mellor referred to the right of the grantor to defend because, in that case, the grantee defended without giving any notice to the grantor of the dispute and then sought attorney fees. Id. Mellor stands only for the rule that the grantor cannot be found to owe attorney fees as a result of a breach of the duty to defend if the grantor never received notice or opportunity to fulfill the duty to defend. Id. Mastro similarly involved a question of the requirements of a tender of defense. [2] 90 Wash.App. at 165, 951 P.2d 817. The specific language of the right to defend, taken in context, refers to the grantee's action of handing over the grantee's right to defend to the grantor through a tender of defense; it does not convert the grantor's duty into a right. ¶ 18 Kiss cites Petersen-Gonzales v. Garcia, 120 Wash.App. 624, 86 P.3d 210 (2004), to define the right to defend, but, as the Court of Appeals noted below, the analogy to Petersen-Gonzales and generally to insurance law is incomplete and inapt. Edmonson, 155 Wash.App. at 385, 228 P.3d 780. Petersen-Gonzales involved a contractual dispute over the right of the insurer to defend in an underinsured motorist suit. 120 Wash.App. at 629, 86 P.3d 210. That court held that an insurer's contractual right to defend included the right to participate at trial, despite the insured's motion to exclude the insurer. Id. at 630-31, 86 P.3d 210. Importantly, the contract in that case created a right, not a duty, of the insurer, which is simply not analogous to the duty of Kiss, as grantor, to defend against another's claim to title pursuant to a statutory warranty deed. ¶ 19 A more appropriate analogy would be to cases involving the duty of an insurer to defend, but Kiss would not find support there for his argument that he may just settle and pay damages. [T]he duty to defend is different from and broader than the duty to indemnify. Am. Best Food, Inc. v. Alea London, Ltd., 168 Wash.2d 398, 404, 229 P.3d 693 (2010). In the insurance context, this court has recognized that the right to a defense may be of greater benefit than indemnity and has held that if there is any reasonable interpretation of the facts or the law that could result in coverage, the insurer must defend. Id. at 405, 229 P.3d 693. If pressed to draw an insurance analogy to the statutory warranty deed, which we do not find necessary, [3] a grantor's settlement of a third party claim to title by concession and paying damages to the grantee is most like indemnity. The duty to defend is something different under both insurance law and a statutory warranty deed. ¶ 20 We hold that the warranty to defend in a statutory warranty deed, RCW 64.04.030, requires that the grantor provide a good faith defense to title. Kiss effectively refused the Popchois' tender of defense when he conditioned his acceptance on a nonexistent right to settle the claim without any consideration of its merits. Accordingly, we affirm the Court of Appeals and hold that Kiss breached the warranty to defend and is therefore liable for the attorney fees incurred by the Popchois in defense of their title.