Hudesman v. Foley, 39082
| Decision Date | 23 May 1968 |
| Docket Number | No. 39082,39082 |
| Court | Washington Supreme Court |
| Parties | David HUDESMAN, Appellant, v. Peter J. FOLEY and Elizabeth E. Foley, husband and wife, Defendants, and George E. Smith and Elizabeth K. Smith, husband and wife, Respondents. |
Lycette, Diamond & Sylvester, Lyle L. Iversen, Seattle, for appellant.
Horswill, Keller, Rohrback, Waldo & Moren, Seattle, for respondents.
Appellant David Hudesman initiated this action seeking specific performance of an earnest-money agreement whereby Peter J. Foley and his wife agreed to sell certain real property to appellant's assignor, Kreger Bros., Inc. Appellant alleged that the Foleys, in contravention of appellant's outstanding rights under the earnest-money agreement, had sold the property to a third party, respondents George E. Smith and his wife, who had, in turn, recorded a statutory warranty deed. The Smiths were joined as party-defendants in the action, it being contended that they were not bona fide purchasers and their title to the property was subordinate to the rights of appellant.
After issues were joined, respondents Smith moved for summary judgment dismissing them from the action. In support of the motion were affidavits of Mr. Smith, Mr. Foley, and Mr. Foley's attorneys, Alva E. Long and Douglas F. Albert. In opposition to the motion appellant provided affidavits of Paul F. Kreger, president of Kreger Bros., Inc., and Roger C. Hayden, an officer of Ballard Escrow, Inc., the agency which was to handle the closing of the Foley-Kreger Bros., Inc., transaction. Also before the trial court and considered by it in passing upon the motion for summary judgment were written interrogatories directed to and answered by Mr. Smith and Mr. Foley. After reviewing the pleadings, the affidavits and the answers to the interrogatories, the trial court granted summary judgment dismissing the Smiths from the action. The trial court did not, by oral opinion, memorandum decision, or by the order of dismissal specify the grounds which formed the basis of its action.
On appeal, appellant contends the trial court erred in granting summary judgment because (1) there exist genuine issues of material and conflicting facts to be resolved, and (2) the Smiths could not, as a matter of law, be conclusively held to be bona fide purchasers. Respondents, on the other hand, assert that (a) the Foley-Kreger Bros., Inc., earnest-money agreement terminated before title was conveyed to respondents, and (b), in any event, respondents were conclusively shown to be bona fide purchasers for value.
A summary of pertinent events leading up to the issues framed upon this appeal as gleaned from the affidavits and pleadings before us may be stated in the following manner: The property involved is approximately 37 acres of unimproved land situated in King County, Washington. During a substantial portion of 1965 title to the property was in litigation between the Foleys and one Madison, the original vendor or his successor, who was pursuing a foreclosure action. The Foleys were in need of cash to effect a settlement of the litigation and clear title to the property. On May 28, 1965, at the behest of Puget Sound Homes, Inc., a realty firm, the Foleys signed an earnest-money receipt and agreement whereby they agreed to sell the property in question to Kreger Bros., Inc., for the sum of $74,000, payable '25 thousand dollars down, including * * * earnest money, & balance cashed out within 3 yrs with interest at 6% Per annum.' The earnest money was in the form of a $1,000 promissory note payable upon demand, which was deposited with the realty firm. Among other things, the earnest-money agreement provided:
(T)his transaction contingent on approval of purchaser's finance institution within 45 days.
10. The sale shall be closed in the office of Ballard Escrow Co., Inc., within 90 days after title insurance policy or title insurance company's report is furnished by owner or completion of financing is called for herein, whichever is later. The purchaser and the seller hereby agree to deposit in escrow all instruments and monies necessary to complete the purchase; * * *.
The 45-day period specified for approval of the purchaser's financing institution expired on July 12, 1965, and passed without the Foleys or their attorneys being notified of any action of the financing institution. A title report was, however, furnished to the realty agency on July 22, 1965, and deposited with the escrow agency on August 2, 1965. Nevertheless, on July 27, 1965, the Foleys, by letter from their attorney, Mr. Albert, notified the realty firm and Kreger Bros., Inc., of the lapse of the 45-day period and stated that unless a $25,000 certified check was deposited within 2 days the transaction would be deemed rescinded. Attorney C. Lee Coulter, on behalf of Kreger Bros., Inc., responded to the Foleys' demand by letter to the realty firm dated July 30, 1965. In his letter Mr. Coulter stated, in substance, that Kreger Bros., Inc., had advised he realtor of the completion of financing, that it did not deem the transaction terminated, that it had 90 days after it received a title report within which to complete the transaction, and that $1,000 cash in lieu of the promissory note was then advanced as earnest money. As a result of this letter, it would appear that the title report, furnished on July 22, 1965, together with the earnest-money agreement, was deposited by the realtor with the escrow agent on August 2nd.
The next pertinent move, revealed by the record before us, appears to have been taken on August 27, 1965, when Mr. Coulter, on behalf of Kreger Bros., Inc., by letter to the escrow agency, Ballard Escrow, Inc., notified that agency of the purchaser's willingness to deposit the sum of $24,000 in escrow, subject to the condition that the Foleys would pay 10 per cent interest thereon if title to the property was not shown to be marketable within 10 days. Seemingly, this condition was predicated upon indications from the Foleys that settlement of the Madison litigation and clearance of title was dependent upon cash being deposited in escrow. In any event, it appears that one of the attorneys for the Foleys was contacted by the escrow agent relative to the proposal and agreed to it, provided the 10-day period for clearance of title be extended to 30 days. This proviso was accepted by Mr. Coulter. Thereafter, on September 16, 1965, the escrow agency prepared and forwarded to one of the attorneys for the Foleys 'new' escrow instructions and five copies of a real-estate contract for the Foleys' signatures. The Foleys never signed these documents, and it does not appear that the $24,000 deposit was ever made.
On September 20, 1965, respondents Smith observed the property in question and inquired of the Foleys as to its availability. Mr. Foley informed Mr. Smith that the property was for sale and directed him to contact the Foleys' attorney Mr. Long. This Mr. Smith did, as a result of which he made an offer of $70,000 net to the Foleys for the property which offer, in turn, was reduced to an earnest-money agreement on September 23, 1965. By the terms of this earnest-money agreement Mr. Smith was to deposit up to $40,000 in escrow, or so much thereof as was necessary to clear the Foleys' title. Concerning his preliminary negotiations with attorney Long, Mr. Smith stated in his affidavit:
Mr. Long said that in the past there had been several squirrely deals, none of which had materialized, and that there had been one Earnest Money Agreement which had expired, and that if I was really interested in purchasing the property I should come up with a fair offer involving cash. He stated that one Madison was attempting to foreclose on the property and that it would take some place between $25,000.00 and $45,000.00 in cash to clear out Madison. I asked Mr. Long what he felt the property would be worth and we discussed values. Mr. Long informed me that the Earnest Money Agreement which had expired was for $74,000.00 and involved a substantial commission. I offered $70,000.00 in cash, net to the Foleys. Mr. Long said he thought this was a fair offer, and accordingly, an Earnest Money was prepared which the Foleys and I signed.
Thereafter, on October 11, 1965, the Foleys' attorney Mr. Albert returned the unsigned Foley-Kreger Bros., Inc., escrow instructions to Ballard Escrow, Inc. In the meantime, Kreger Bros., Inc., had assigned its interest in the earnest-money agreement to appellant, David Hudesman, who, in turn, submitted to the escrow agency a tender of the full purchase price called for in the agreement ($74,000). This was done by way of a letter of commitment from Peoples National Bank dated October 22, 1965. This tender was transmitted by the escrow agency to counsel for the Foleys by letter dated October 26, 1965. The precise response or the form thereof made by the Foleys to this tender is not revealed by the affidavits.
Following this tender, and on October 30, 1965, respondent George Smith met with attorney Long. According to Mr. Smith's affidavit the following exchange of views took place:
On or about October 30th, it was necessary for me to put the $40,000.00 into escrow to clear up the Madison suit. At this time Mr. Long and I met at the King County Courthouse. I was naturally somewhat concerned about putting up $40,000.00 and asked Mr. Long's assurance if everything was proper. He assured me it was. He stated that since the Foleys and I had signed the Earnest Money Agreements, several offers had come in on the property for more money, but that he had turned them down because Mr. Foley and I had made a deal. He stated at this time that one of the deals was a Mr. Hudesman, who was trying to reactivate an Earnest Money Agreement from Kreger Brothers, which had expired. I asked him if he was sure this had expired and he said that it had. He said to me...
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