Hebb v. Severson

• Decision Date: 23 December 1948
• Docket Number: 30623.
• Parties: HEBB et ux. v. SEVERSON et ux.
• Court: Washington Supreme Court

201 P.2d 156

32 Wn.2d 159

HEBB et ux. v. SEVERSON et ux.

No. 30623.

Supreme Court of Washington

December 23, 1948

Department 1

Action by Ross P. Hebb and Irene M. Hebb, his wife, against E. H Severson and Anne M. Severson, his wife, for specific performance of contract to purchase real estate. From a decree for plaintiffs, the defendants appeal.

Decree reversed with instructions.

Appeal from Superior Court, King County; J. T Ronald, Judge.

Barker & Day and Wm. J. Walsh, Jr., all of Seattle, for appellants.

Lundin and Barto and William H. Goucher, all of Seattle, for respondents.

STEINERT Justice.

Plaintiffs instituted action to compel specific performance of a contract, denominated an earnest money receipt, wherein the defendants promised, subject to specified terms and conditions, to purchase certain real property owned by the plaintiffs. This agreement, setting forth the rights and obligations of the parties thereunder, so far as is material here, reads as follows:

'Earnest Money Receipt

'Seattle, Washington, March 31, 1947

'Received from E. H. Severson, Anne M. (His wife), hereinafter called 'purchaser' One Thousand and no/100 ... ($1000.00) Dollars as earnest money in part payment of the purchase price of the following described real estate in King County, Washington:

'Lot thirteen (13), Block three (3), Hebb's Avion City addition to the City of Seattle, Washington, commonly known as 5700 East 61st.

'Total purchase price is Twelve Thousand Dollars ($12,000.00), payable as follows:

'Four Thousand Dollars ($4000.00) cash, including the amount herein receipted for on closing. Balance to be paid from the proceeds of an F. H. A. loan which the purchaser agrees to apply for through Burwell & Morford, within five (5) days from the date of this receipt. It is understood that purchaser's obligation to purchase is contingent on securing said loan in the amount of Eight Thousand Dollars ($8000.00).

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'Owner shall furnish purchaser, as soon as procurable and within 30 days of date of acceptance of this offer, Puget Sound Title Insurance Company's policy of title insurance or its title report evidencing condition of title.

'If title is not insurable and cannot be made insurable within 60 days from date of title report, earnest money shall be refunded and all rights of purchaser terminated, except that purchaser may waive defects and elect to purchase. But if title is good and purchaser neglects or refuses to complete purchase, the earnest money may, at seller's option, be forfeited as liquidated damages. The agent shall not be responsible for delivery of title.

'The property is to be conveyed by warranty deed, free of encumbrances except: None.

'Rights reserved in federal patents or state deeds, building or use restrictions general to the district, and building or zoning regulations and provisions shall not be deemed encumbrances.

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'Purchaser offers to purchase the property on the terms noted.

'The sale shall be closed within five (5) days after loan is completed and title insurance policy or title insurance company's report is furnished by owner. The purchaser and the seller will, on demand of either, deposit in escrow with the company furnishing the evidence of title all instruments and monies necessary to complete the purchase; the cost of escrow shall be paid one-half each by seller and purchaser.'

In their answer, the defendants admitted that the above contract of sale had been executed by the parties, but alleged, by way of affirmative defense, that the plaintiffs had failed to comply with the terms thereof in that: (1) A title insurance policy or a report by the title insurance company, evidencing the state of title, was not submitted to the defendants within thirty days after the defendants had signed the agreement; (2) the plaintiffs had failed to make the title insurable within sixty days after the title report was furnished, or at all; and (3) the title to the property in question was not marketable because of the following encumbrances: (a) a right of easement, granted to the city of Seattle, to maintain a watermain upon and across the property; (b) the right of the public to make all necessary slopes for cuts or fills upon the property, in the reasonable original grading of the streets adjacent thereto, as granted in the dedication of the platted addition, and (c) an existing violation of a certain protective restriction, to which all lots in the addition are subject, which restriction provides that 'no building shall be erected on any lot * * * nearer than 5 feet to any side of lot line.' The defendants further alleged in their answer that, because of this failure of the plaintiffs to comply with the terms of the agreement, the defendants did timely rescind the transaction and demand the return of their earnest money and all other sums paid over pursuant to the earnest money contract. They thereupon prayed that the court deny the relief asked for by the plaintiffs and enter a decree rescinding the contract.

Replying to the new matter alleged in the answer, the plaintiffs, in addition to a denial of the truth of some of the allegations contained therein, affirmatively pleaded (1) that any delay on the part of the plaintiffs in furnishing to the defendants, pursuant to the terms of the contract, a title insurance policy or title insurance report had been waived by the actions of the defendants; (2) that the supposed easement right to maintain a watermain had been abandoned by the city of Seattle, and therefore no longer constituted an encumbrance on the land contracted to be sold; and (3) that, in any event, none of the alleged defects set forth in defendants' answer constituted in law an encumbrance on the property.

Upon these issues, framed by the pleadings, the cause was tried to the court and, after both sides had presented all available evidence and concluded their arguments on the law applicable thereto, the court rendered an oral decision in which it indicated that a decree would be entered in favor of the plaintiffs. The defendants thereupon presented a motion for judgment notwithstanding the oral decision. The court denied the motion and entered its decree commanding the defendants to accept the warranty deed tendered into court and to pay, or cause to be paid, to the plaintiffs the balance of the purchase price of the property, due under the contract. The decree further directed that, in the event the defendants should fail to specifically perform the contract, a judgment would be entered against them for the balance due under the written agreement. Defendants appealed.

Prior to the trial of this action, the parties thereto entered into a written stipulation, setting forth, as agreed upon, the following facts relative to the suit: On March 31, 1947, the appellants, E. H. Severson and Anne M. Severson, executed and delivered to the respondents, Ross P. Hebb and Irene M. Hebb, the earnest money receipt set forth above, wherein the appellants offered to purchase from the respondents a city lot, upon which a house had just been constructed, for the sum of $12,000. At the same time, appellants deposited $1,000 with respondents as earnest money and, on April 7, 1947, the respondents accepted the offer to purchase and signed the earnest money agreement.

It was further stipulated by the parties that, for the purpose of securing funds with which to pay in part the balance of the purchase price owing under the contract, the appellants applied to the mortgage loan firm of Burwell & Morford for a loan in the sum of $8,000. Following the issuance, by the Federal housing administration, of its commitment to insure the proposed loan for the full amount, the appellants, on June 9, 1947, made, executed, and delivered to Burwell & Morford, as mortgagee, their promissory note for $8,000, together with a real estate mortgage on the lot above mentioned as security. This mortgage was subsequently recorded, although no part of the loan which it was designed to secure has ever been disbursed by the mortgagee. To insure payment of the remainder of the purchase price, the appellants deposited with the mortgage firm the sum of $3,186.17, but with the instruction to that firm that it should not pay over to the respondents any part of this fund until it was directed by the appellants to do so.

On June 26, 1947, according to the agreed facts, the appellants, through their attorneys, notified respondents that they were rescinding the transaction, and again advised Burwell & Morford not to pay out any of the sum of money deposited with it until further instructed on the matter by the attorneys for appellants.

It was also stipulated that, on August 4, 1947, the respondents furnished to the appellants a title report which showed the title of the property here involved to be subject to (1) an easement for a watermain, but with the notation that the easement had been vacated; (2) the right of the public to make all necessary slopes for cuts or fills upon the lot, in the reasonable original grading of streets, granted in the dedication of the plat; and (3) a declaration of protective restrictions, recorded April 5, 1937. Immediately following this information concerning the declaration of restrictions is a note stating that the title company's inspection of the premises disclosed a breach of one of these restrictions, in that the dwelling house located on the lot involved is less than five feet from the east side line of the premises. The note then continues with the statement:

'The policy to issue will, however, affirmatively insure against loss or damage resulting from such violation and will further affirmatively insure that neither said violation nor...