Gazin v. Hieber, 655--II

• Decision Date: 18 December 1972
• Docket Number: No. 655--II,655--II
• Citation: 504 P.2d 1178,8 Wn.App. 104
• Parties: Joseph M. GAZIN, Respondent, v. John E. HIEBER et al., Appellants.
• Court: Washington Court of Appeals

Page 104

8 Wn.App. 104

504 P.2d 1178

Joseph M. GAZIN, Respondent, v. John E. HIEBER et al., Appellants.

No. 655--II.

Court of Appeals of Washington, Division 2.

Dec. 18, 1972.

James C. Young, of Young & Hoff, Seattle, for appellants.

Edward R. Langenbach, Jr., of Short, Cressman & Cable, Seattle, for respondent.

PETRIE, Chief Judge.

In order to savor the full flavor of this appeal it seems necessary to provide some background information gleaned from the record. The corporate defendant, Nautilus, Inc., acquired title to an elongated strip of tidelands along Hood Canal in Jefferson County extending in depth from the line of ordinary high tide to the line of extreme low tide. See Sallee v. Bugge Canning Co., 38 Wash.2d 737, 232 P.2d 81 (1951) for an interesting history of title to portions of these tidelands. Some time after its incorporation in 1967, Nautilus began development of these tidelands into building sites aided in part by natural accretion and in part simply by bulkheading and filling. Defendant, John E. Hieber, is president, and defendant, Betty H. Hieber, his wife, is secretary of Nautilus.

For understandable reasons, this activity by Nautilus caused considerable consternation to some of the upland owners. The record is far from precise on this point, but it appears that recording in Jefferson County of the original deed from the state of Washington had been considerably delayed although it was of record in the offices of the Department of Natural Resources in Olympia. In early October, 1969, at least some of the upland owners instituted an action against Nautilus and others, seeking to quiet title in themselves to that portion of the tidelands extending from the line of ordinary high tide to the government meander line. ¹ We are not concerned directly with that lawsuit. However, we have been advised at oral argument herein that the action had not as of that time been completely settled.

The plaintiff, Joseph M. Gazin, wanted to purchase one of the lots Nautilus was developing, but did not want to become directly involved in the existing lawsuit. In mid-October, 1969, Nautilus and Gazin executed an earnest money agreement for the sale and purchase of a 75-foot wide lot extending seaward from the meander line to the line of extreme low tide for $11,250 with the understanding that the seller would convert the partially submerged lot to a suitable building site. The agreement called for a down payment of $5,000 to be held and distributed by an escrow company. A key provision of the earnest money agreement read:

Completion of construction of lot to be approved by Bush, Reed & Hitchings as in adjacent parcels. Purchaser hereby authorizes escrow company to disburse funds to authorized contractors as work is completed and approved by above surveyors. Full disbursement shall be made to seller upon final approval of construction.

On January 9, 1970, Gazin made the down payment of $5,000 directly to Nautilus and the parties executed a real estate contract which provided in part that the contract balance, together with interest thereon, would be paid at the rate of $75 per month. The record does not reflect why the contemplated use of the escrow company was abandoned. It does appear, however, that in the interim ² between the dates of execution of the two documents, the property became encumbered by a mortgage in the amount of $5,500. Concomitant with execution of the real estate contract, and clearly as a part thereof, the parties executed a confidential 'agreement' which provided as follows:

1. That pertaining to one real estate contract between Joe Gazin and Nautilus, Inc., a Washington corporation, dated January 9, 1970, there exists the possibility of a price adjustment in the event of forced removal of certain improvements to said described property.

2. That the amount deducted from the balance due seller be set at the cost of said improvements, the seller being solely responsible for the removal of said improvements in such an event.

3. That a title insurance policy (mortgagee type) has been issued on said property in the amount of $5,500.00, said mortgage collected at Hyldahl's Inc., 7916 Greenwood Ave., N., Seattle, Wash., said mortgage having been recorded.

4. That Nautilus, Inc., is solely responsible for payment of said mortgage, and will use funds from the proceeds of the contract between the parties hereto for the express purpose of retiring said mortgage.

5. That a title policy to purchaser has been paid for and said policy will be delivered as soon as issued by the title company.

6. That the seller is defending and will continue to defend any legal action involving property at South Point, and shall hereby indemnify purchaser for any losses resulting from said action other than in paragraphs 1 & 2, as already provided.

7. Seller will provide the best building site suitable to the environment, unless improvements are continued all the way to the Ferry dock bulkhead, in which case work shall be stabilized as required by Bush, Reed and Hitchings, Engineers, Seattle, or as mutually agreed between the parties hereto. In the event fill can be stabilized without completing bulkhead, cost of said completion shall be deducted from contract balance, said sum not to exceed $750.00.

We pause momentarily at this point to reflect upon the nature of the total contract between Mr. Gazin and Nautilus, Inc. It is not only a contract to sell specified tidelands, but also a construction contract in which Nautilus agreed to improve the property by providing 'the best building site suitable to the environment', to be completed at some indefinite time in the future in one of several possible methods not definitely ascertainable at the date of the contract. In addition, it is an indemnity contract, recognizing the existence of pending litigation and possible future litigation, which might have an effect upon the property including the possibility of 'forced removal of certain improvements' at some time in the future. The seller specifically agreed to indemnify the purchaser for any losses resulting from said litigation including, but not limited to, a reduction in the purchase price in the event of forced removal of improvements limited to 'the cost of said improvements.' Finally, the sales contract, itself, is somewhat unusual because the differential between the balance due on the contract and the principal due on the then existing mortgage (recognized as the seller's obligation) is only $750, the amount by which the contract balance will be reduced 'in the event fill can be stabilized without completing bulkhead.'

For some 14 months following execution of the real estate contract, the parties engaged in discussion and correspondence directed at the progress--or lack of progress--in preparing the tideland property for a building site. The record indicates that by October, 1970, the beach had risen 20 inches through natural accretion and had all but buried the base rock on the purchased property; that the storms during the winter of 1971 'washed a lot of the top stuff out;' and that as late as October 10, 1972, the date of oral argument before this court, Gazin had not yet been provided with property appropriate for a building site. Furthermore, the litigation, which the parties recognized as pending on the date they executed this contract, was still pending at the time of oral argument before this court.

In April, 1971, plaintiff filed an amended complaint against Nautilus, Inc., and John E. and Betty H. Hieber, individually, in Jefferson County, seeking alternatively rescission or specific performance of the contract including provision for adequate access to the lot by appropriate deed or easement. The amended complaint alleged, in part, that the property 'remains less than 50% Complete' and 'unusable for the purpose for which it was purchased.' There was a further allegation that 'Defendants' failure to complete the subject lot constitutes a material breach of the contract.' Plaintiff obtained the deposition of John E. Hieber, president of Nautilus, Inc., together with answers to requests for admission. In addition, the parties executed and filed with the court a 'stipulation', which is more nearly in the nature of partial performance by both parties of their respective contractual obligations. As a part of that stipulation, a statutory warranty deed (presumably from Nautilus to Gazin) was executed and filed 'with the Court for keeping with the Court.' Gazin promised and agreed to make all mortgage payments to the mortgage holder, and all mortgage payments so made were agreed to be considered as having been made in satisfaction of his obligations under the contract. Based upon these documents, plaintiff moved for summary judgment directing specific performance of the real estate contract. Defendants, John E. and Betty Hieber, moved to be dismissed from the action, both individually and as a marital community. The trial court did not enter any order expressly on Hiebers' motion, but on October 18, 1971, the court did enter an 'Order Granting Plaintiff's Motion for Summary Judgment,' the decretal portion of which provides in part:

1. Defendants Are liable to plaintiff for the reasonable Cast of completing plaintiff's lot By performing all tasks required to Fill the subject property And construct a bulkhead to provide a suitable Residential building lot;

3. Defendants are ordered to convey the subject property to plaintiff in fee simple with the usual covenants of warranty By delivering to plaintiff the Statutory Warranty Deed now held by the clerk of this court or such other legally sufficient statutory warranty deed as is required.

(Emphasis added.)

The recital portion of the order provides in part:

THIS MATTER having come on regularly for hearing on September 7, 1971, on plaintiff's Motion for Summary Judgment on its Amended Complaint On the question of liability against defendants, ...