Kreger v. Hall

• Decision Date: 31 March 1967
• Docket Number: No. 38720,38720
• Citation: 70 Wn.2d 1002,425 P.2d 638
• Court: Washington Supreme Court
• Parties: Paul KREGER and Fred Kreger, doing business as Kreger Brothers, and Kreger Brothers, Inc., Respondents, v. Alma E. HALL and Jane Doe Hall, husband and wife et al., Appellants.

Page 1002

70 Wn.2d 1002

425 P.2d 638

Paul KREGER and Fred Kreger, doing business as Kreger Brothers, and Kreger Brothers, Inc., Respondents, v. Alma E. HALL and Jane Doe Hall, husband and wife et al., Appellants.

No. 38720.

Supreme Court of Washington, Department 2.

March 31, 1967.

Cummings & Harris, Theodore P. Cummings, Seattle, for appellants.

Lycette, Diamond & Sylvester, Lyle L. Iversen, Seattle, for respondents.

OTT, Judge.

December 7, 1964, Kreger Brothers, Inc., a corporation, (hereinafter referred to as Kreger Brothers) entered into an earnest money receipt and agreement with Alma E. Hall and Gilbert Carraher (hereinafter referred to as sellers) for the purchase of approximately 15 acres of land in King County containing a gravel pit, for the sum of $40,000. The earnest money agreement acknowledged receipt of the payment of $1,000 and provided that upon the sellers' furnishing title clear of encumbrances that $11,500, including the earnest money, be paid in cash on the closing of the sale, February 1, 1965, and that 'Encumbrances to be discharged by seller may be paid out of purchase money at date of closing.' The balance of the contract was to be paid in annual installments in an amount of $2,500 or more at the option of purchasers, Kreger Brothers. Section 8 of the earnest money agreement provided:

The sale shall be closed in office of Lande, Eide & McLeod, Attorneys, within 30 days after title insurance policy or report preliminary thereto is delivered showing title insurable, as above provided, or after completion of financing, if financing is called for herein, whichever is later, but in any event not later than February 1, 1965, which shall be the termination date. The purchaser and seller will, on demand of either, deposit in escrow with Lande, Eide & McLeod, Attorneys, all instruments and monies necessary to complete the purchase in accordance with this agreement; the cost of escrow shall be paid one-half each by seller and purchaser.

According to the title report, there were two encumbrances on the property at the time of the execution of the earnest money receipt, an unexpired lease, and a mortgage to Security Savings and Loan Association in the sum of $10,000. The lease encumbrance was satisfied of record prior to the closing date of February 1, 1965. The mortgage encumbrance was not satisfied. The sellers on the 28th day of January, 1965, wrote the following letter to Kreger Brothers:

Confirming our telephone conversation of today, this will advise you that the sellers, Carraher and Hall, demand that Kreger Bros., Inc., proceed in accordance with the earnest money agreement and receipt of December 7, 1964, to deposit the balance of the $11,500.00 down payment for closing of the sale of the gravel pit property located at 9621 So. 216th St., Kent, Wash.

We request that you deposit this money with our office, not later that (sic) February 1, 1965, as provided by the earnest money agreement; otherwise, the sellers have elected to declare all rights of purchasers terminated, as provided by the earnest money agreement.

Kreger Brothers, upon receipt of the letter, advised the office of the sender that they were ready, able and willing to pay the $10,500 down payment, upon the furnishing of title clear of encumbrances and that, if this encumbrance was not previously satisfied, it be paid out of the down payment, or in the alternative the purchasers would assume the mortgage and remit to the sellers any balance remaining over and above the amount of the encumbrance. Kreger Brothers had previously been informed by the sellers that their down payment would not be used to satisfy the mortgage on the property but would be used for other purposes, and that sellers intended to satisfy the encumbrance at a later date from insurance payments.

January 29, 1965, Hall and Carraher entered into an earnest money receipt and agreement for the sale of the property to Parker, Smith, Pauscheck, and Pauscheck, Jr., upon the same terms except that these prospective purchasers did not require that the mortgage encumbrance be satisfied out of the down payment. The agreement provided, 'This agreement is signed subject to complete clearance of default of agreement between the Kregers and sellers, and will be null and void if Kregers' default of purchase becomes valid.'

February 5, 1965, when the down payment had not been made, the sellers wrote the following:

This will advise you that the sellers in the above referenced matter have elected to terminate and cancel the certain earnest money agreement dated December 7th, 1964, by reason of your failure to deposit the sum of $11,500.00 as down payment within the time provided in the earnest money agreement.

Upon receipt of this letter of forfeiture, Kreger Brothers' attorney sent the following letter in reply:

Last week I notified your office by telephone, your secretary taking the call and advising me that you were not in the office at that time, that Kreger was ready to pay off in full the balance due upon the Carraher contract, providing the title report showed the same to be free and clear, in other words, the title report would have to dispense with the lease, which, it is my understanding, is upon the property. I left a call for you and I received no reply, and we have not yet been offered a title report showing free and clear title and have received no response to repeated telephone calls left for you.

Since then, we have received your letter of Feb. 5, 1965, and this is to advise you that upon the clearing of the lease and the presentation of a title report showing the title to be free and clear we are ready to pay off the contract in full, which is a renewal and confirmation of our telephone calls.

Kreger Brothers commenced this action for specific performance of the earnest money agreement. They contended that at all times they were ready, willing and able to pay the balance of the down payment of $10,500; that the sellers failed to deliver a title report showing clear title; that the sellers refused to apply the down payment to satisfy the savings and loan encumbrance as required by the agreement; and that the seller in the alternative refused to permit Kreger Brothers to assume the indebtedness against the premises as a part of the down payment. Kreger Brothers prayed that they be permitted to deposit the $10,500 into court; that the sum be applied to satisfy the encumbrance; that the sellers be required to execute the installment contract as provided in the earnest money agreement; and that the subsequent prospective purchasers' claim, if any, be adjudicated to be junior to the claim of Kreger Brothers. The sellers answered the complaint and alleged that the earnest money agreement was regularly forfeited after due notice; that Kreger Brothers failed to pay any sum other than the earnest money payment prior to the termination date, February 1, 1965; and prayed that Kreger Brothers take nothing by virtue of the cause of action.

The cause was tried to the court which entered findings of fact and conclusions of law predicated upon evidence substantially as above outlined. The court directed that Kreger Brothers deposit into court the sum of $10,500, that the payment be used to satisfy the encumbrance and that the sellers execute a contract for the balance of the sale price in accordance with the provisions of the earnest money agreement. The court further held that the alleged sale to Smith, Parker, and the Pauschecks was junior to the prior rights of Kreger Brothers. From the entry of a judgment predicated on the court's findings of fact and conclusions of law, sellers have appealed.

On appeal, the appellant sellers assert that the trial court erred in ordering specific performance of the earnest money agreement and in failing to find that there had been a forfeiture.

The trial court's pertinent findings of fact are as follows:

By the terms of the earnest money agreement, the title of seller was to be free of encumbrances or defects except easements, restrictions and zoning regulations of record, and a title policy containing no exceptions other than those provided for was to be furnished by the seller and the deal was to be closed in the office of Lande, Eide & McLeod, attorneys, within thirty days after title insurance policy or report preliminary thereto was delivered showing title insurable as provided but in any event, not later than February 1, 1965. Finding of Fact No. 6.

A preliminary commitment for title insurance was obtained by the sellers from ...