Court Opinion

ID: 9529556
Source: CourtListenerOpinion
Date Created: 2023-08-07 03:51:58.648336+00
Date Added: 2024-06-11T13:27:50.671494
License: Public Domain

*399Dore, J.
(dissenting)—I would hold that buyers, Willener and Mykol, breached the subject contract by failing to tender their cash down payment and that sellers, Sweeting et al, should be granted judgment in the amount of $15,001 plus interest on their cross complaint.
Facts
The buyers argue for a refund of their earnest money plus interest because the sellers allegedly were unable to deliver marketable title. However, the facts do not coincide with this assertion. Paragraph 3 of the earnest money agreement provided for the nondefaulting seller to retain all earnest money. Paragraph 4 required the sellers to furnish a standard form title insurance policy and a preliminary commitment issued by the title company. Earnest money was to be refunded only if title was uninsurable as of December 15, 1979, although the buyers could "waive defects and elect to purchase."
The earnest money agreement provided that half of the prepaid $10,000 was nonrefundable. However, the buyers could elect to proceed or not to proceed to closing, with an option deadline of September 15, 1979. If by that date the buyers elected to proceed, they knew that the entire $10,000 was nonrefundable. They further agreed to pay an additional $5,000 to again extend their option to proceed or not proceed. This second option deadline was October 15, 1979. Whether they elected to close or not, the buyers knew they would forfeit the full $15,000.
Title was insurable and escrow was ready to close on the appointed date. Previous to the date set for closing, on August 29, 1979, the buyers had accepted the preliminary title report. Although they knew that there existed certain landscaping and pavement encroachments by the sellers' lessee, Standard Oil, the buyers elected to advance their additional $5,000 earnest money. By so acting, the buyers acknowledged that any existing defects were curable, and thereby lost their right to later assert such defects to repudiate the contract. See Kessinger v. Anderson, 31 Wn.2d *400157, 170-72, 196 P.2d 289 (1948); Haire v. Patterson, 63 Wn.2d 282, 288, 386 P.2d 953 (1963).
Further, the marketable title requirement of a seller is not title so perfect that it must be free from every conceivable technical criticism; title need only be free from those possibilities of defect which post a threat to its validity. Liberty Lk. Sewer Dist. 1 v. Liberty Lk. Utils. Co., 37 Wn. App. 809, 817, 683 P.2d 1117, review denied, 102 Wn.2d 1009 (1984); Brown v. Herman, 75 Wn.2d 816, 823, 454 P.2d 212 (1969). Where, as here, an alleged defect involves only a small portion of the land being sold, where there is no danger that hostile claims will be entered against the title and a title insurance company is willing to insure it, a purchaser may not allege unmarketable title to escape his contract. Central Life Assur. Soc'y v. Impelmans, 13 Wn.2d 632, 644-45, 126 P.2d 757 (1942). The buyers lost their right to argue an alleged title defect when, knowing of the defect, they made voluntary payments on the contract and tried to sell part of the property. Central, at 647.
In their letter to Lundstrom, dated October 14, 1979, the buyers reiterated their satisfaction with the purchase. The buyers chose to consult their own engineering firm, which recommended that any defects be cured by slightly increasing the boundaries of the Standard Oil lease, thereby commensurately reducing the size of the property being sold. The buyers accepted this recommendation. By such acceptance, they agreed to surrender the encroaching land. By October 18, 1979, the buyers were preparing an amendment to the lease description. On numerous occasions thereafter they continued to assure the sellers that they were proceeding with the lease amendment and that all was well.
In the meantime the buyers had entered into two additional earnest money agreements with an auto parts business (Hollyoak-Boerner) and a fast food business (Kentucky Fried Chicken). In these earnest money agreements the buyers sought to convey part of the land at issue in this case. The closing date in both of these transactions was set for December 15, 1979, the same date set for closing *401on the master property. However, in order to close these two transactions, the buyers had to file a short plat with the County, and in order to file the short plat, closing on the master property was needed. During the buyers' negotiations with Standard Oil, the sellers remained firm in their assertion that the short plat would neither negate the closing requirement nor change the property described in the earnest money agreement, and that the measurements of the short plat must coincide exactly with their land as described in the Standard Oil lease.
When on November 29, 1979, Lundstrom opened escrow on the master property he forwarded the earnest money agreement and an unsigned copy of the lease amendment. On December 3, he also sent the earnest money agreements for the two other transactions, although Willener and Mykol had not yet gotten the short plat from the County. Subsequently the lease amendment was never signed by Pacific National Bank for the John L. Crawford Trust (one of the sellers). It was also never signed by Standard Oil. The bank had agreed to sign after all other parties signed, and the buyers assured the sellers that Standard Oil would soon sign. However, on December 12, 1979 the buyers were told by their engineering firm that Standard Oil was hesitating due to its concern that its encroachments existed within county road right of way; Standard Oil was therefore awaiting assurance from the County that it would not have to remove the improvements at its own expense.
Analysis
The real problem in this case thus emerges as a dispute over when to convey title. The real estate contract and escrow instructions of December 21, 1979, were never signed by the bank for the John L. Crawford Trust. Exhibit A to this contract called for the buyers to provide the legal description, and the sellers to then execute and deliver deeds "in partial fulfillment" of the contract describing the two additional parcels, thereby releasing some 40,000 square feet; upon such release the buyers would then give *402the sellers a copy of the short plat.
Obviously the sellers were unwilling to deed over part of their land before they had their money. Such a requirement was not a part of their original agreement. When the buyers then deposited only $1 into escrow and tendered a mere note for the $9,999 balance to extend closing, it became clear that if the sellers delivered such title, they might not be paid at all. In such event, the sellers would only have had a legal claim against the buyers instead of the agreed cash. Therefore the bank would not sign the lease amendment and escrow instructions before Standard Oil signed, and without those signatures there would be no short plat approval.
Without title to the property involved in the two other transactions, the buyers could not sell it; and without funds from those sales, the buyers could not close on the master property. The buyers then sought legal advice in order to escape their agreement. Thereafter they wrote to Lund-strom on December 28, 1979 stating that they would not close unless the Standard Oil improvements were removed before closing.
The buyers' actions were clearly contrary to their prior agreement and representations that they would cure any existing defect. Thus it was the buyers, not the sellers, who were in breach. The sellers had a marketable title. The sellers knew that the buyers were without enough funds; hence, the sellers were excused from tendering a deed at closing. Artz v. O'Bannon, 17 Wn. App. 421, 426, 562 P.2d 674 (1977). They were not required to perform a useless act and tender closing documents, as they knew that the buyers didn't have the cash to close. Jenson v. Richens, 74 Wn.2d 41, 46, 442 P.2d 636 (1968).
The provision calling for forfeiture of earnest money upon the buyers' election to continue toward closing was a valid provision for liquidated damages. Mahoney v. Tingley, 85 Wn.2d 95, 98, 529 P.2d 1068 (1975); Artz v. O'Bannon, supra at 427. The buyers never objected to the sellers' receipt of their nonrefundable earnest money and extension *403fee. By their actions on numerous occasions the buyers led the sellers to believe that any defects were curable and that the deal would close. Those actions preclude them from now asserting an unmarketable title. See Annot., Marketable Title, 57 A.L.R. 1253, 1550-54 (1928).
Conclusion
Because the buyers repudiated their contract, they were in default. Therefore the sellers were entitled to forfeit the $15,001 earnest money plus interest as liquidated damages.
I would have dismissed the buyers' lawsuit and granted the sellers judgment on their cross complaint, against the buyers, in the amount of $15,001 plus interest.
Brachtenbach and Goodloe, JJ., concur with Dore, J.