Daily Decisions: Court of Appeals Rejects Six Alternative Holdings in Reversing Trial Court

Wow. There are reversals, and then there are reversals. The Newport Yacht Basin Ass’n of Condominium Owners v. Supreme Northwest, Inc. (Division 1, May 7, 2012), is the latter. In this dispute, which involved title to three plots of lakefront property, the trial court ruled in favor of Supreme Northwest (d/b/a “Seattle Boat”) based on six independent holdings, each of which would have been sufficient to support the trial court’s decision. The Court of Appeals reversed all six holdings. All six! Yikes. (Though the Court of Appeals did rule in favor of Seattle Boat on a smaller matter, discussed below.)

So here’s what happened: Seattle Boat bought some lakefront property in 2007 for $4.15 million to develop a commercial storage and sales facility. The Newport Yacht Basin Association Condominium Owners (“NYBA”) manages a marina adjacent to Seattle Boat’s newly purchased land. NYBA opposed Seattle Boat’s development plans. And, it just so happened that NYBA had in its possession a quitclaim deed from 1981 indicating ownership of three lots (conveniently named lots A, B, and C) that are located within the property Seattle Boat claimed to own and sought to develop. The deed was property recorded back in 1981. Deed in hand, NYBA sued to quiet title and consequently stop development on the lots.

Now, you might be wondering: How on earth did NYBA have a deed to the lots when Seattle Boat just purchased the lots in 2007? Well, these lots have a past. All of the property claimed by Seattle Boat and NYBA used to be owned by two individuals – John Radovich and Russell Keyes. Apparently, after transferring A, B, and C to NYBA by quitclaim in 1981, Radovich and Keyes conveyed that same property to Bridges (I’m skipping some steps here) by warranty deed. Bridges then conveyed its interest to Seattle Boat in 2007.

Clearly, Seattle Boat is not happy about this turn of events. So after NYBA sued Seattle Boat, Seattle Boat added a claim against Bridges for failing to convey good title. Bridges turned around and added its own claim against Radovich and Keyes because theyallegedly failed to convey good title to Bridges. Okay, the civ pro portion of the fact pattern is over.

On to the various holdings and reversals. First, the trial court had used extrinsic evidence to find that NYBA’s quitclaim deed did not intend to convey a fee simple interest in lots A, B, and C. That was a no-no, according to the Court of Appeals. “It has long been the rule of our state that, where the plain language of a deed is unambiguous, extrinsic evidence will not be considered.” But “where ambiguity exists, extrinsic evidence may be considered in ascertaining the intentions of the parties.”

The form of a quitclaim deed is described by RCW 64.04.050, which states that a deed “may be in substance” as follows:

The grantor (here insert the name or names and place of residence), for and in consideration of (here insert consideration) conveys and quitclaims to (here insert grantee’s name or names) all interest in the following described real estate (here insert description), situated in the county of . . . . . ., state of Washington.  Dated this . . . . day of . . . . . ., 19. . .

(emphasis added).

The 1981 quitclaim deed follows that form, but it does not include the phrase “all interest in.” Seattle Boat therefore claimed that the omission of this phrase creates an ambiguity regarding whether the grantors really intended to convey all of their rights. The Court of Appeals disagreed. There is no need for the deed to precisely match the statutory form. The important operative terms are “conveys and quitclaims.” The 1981 deed has that language. It therefore unambiguously conveyed fee simple interest to NYBA. There was no need to look to any extrinsic evidence.

The Court of Appeals acknowledged a line of Supreme Court cases holding that, even absent ambiguity, extrinsic evidence should always be considered in interpreting deeds for railroad rights-of-way. But that is a unique area of law, and the Supreme Court “has never seen fit to apply this principle outside of the context of railroad right-of-way cases.”

Accordingly, the trial court erred by looking at extrinsic evidence. The quitclaim deed was clear on its face that it conveyed a fee simple interest in the property to NYBA.

Second, the trial court held that NYBA’s deed was invalid because Radovich and Keyes (the original owners) violated a then-applicable city regulation when they subdivided the property. The Court of Appeals’ response to this was, basically, “so what?” The failure to comply with a city regulation regarding the division of property into lots doesn’t serve to invalidate an otherwise valid conveyance of that property. So that holding was also reversed.

Third, the trial court held that because the NYBA is an unincorporated association, it does not have power to take title under the quitclaim deed. Again, the Court of Appeals disagreed. While the NYBA cannot hold title in its own name, that doesn’t invalidate the deed; it just means that the association’s members own the property. The conveyance is still valid.

Fourth, the trial court held that the deed was invalid because it was not reflected in the NYBA’s condominium declaration, which is statutorily required to include descriptions of common areas such as the lots at issue. The Court of Appeals observed that, while NYBA may be in violation of the condo statute, that violation does not invalidate the conveyance. Seattle Boat had argued that the violation should invalidate the deed because the purpose of the statutory declaration requirement is to provide notice of a condo’s property. But do you know what statute actually serves to provide notice of property ownership? The recording statutes! And the deed was properly recorded. So Seattle Boat got no traction on that one.

Fifth, the trial court held that laches and equitable estoppel barred NYBA’s claims. Again, the Court of Appeals reversed. True, NYBA did not litigate or fight Bridges about the ownership of the property. But that wasn’t because NYBA was sitting on its hands; it was because the two lived in peace. There was no reason to fight until Seattle Boat started its development plans. Accordingly, neither laches or estoppel applied.

An aside: The Court of Appeals’ standard of review on this point is totally unclear. But it seems like the Court gave no deference to the trial court’s findings and applications on the laches/estoppel issue. The Court just starts from scratch. Perhaps de novo review is proper, but at this point it seems like after four reversals the Court is generally skeptical of everything that happened below.

Sixth, the trial court held that the deed was invalid because of lack of consideration. The Court of Appeals rejected this conclusion for a number of reasons: (a) a stranger to a contract cannot seek to invalidate it for lack of consideration; (b) lack of consideration would require rescission, not invalidation; (c) rescission would be really hard in this case, given the complicated transactions and time that had passed, so it would likely not be appropriate; and, perhaps most importantly, (d) there was consideration. Other than that, no problem.

Finally, the Court of Appeals did agree that a small portion of lot B had been acquired by Bridges by adverse possession. Accordingly, that portion of lot B was (1) transferred from Bridges to Seattle Boat in the 2007 transaction and (2) no longer owned by NYBA.

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4 thoughts on “Daily Decisions: Court of Appeals Rejects Six Alternative Holdings in Reversing Trial Court

  1. Pingback: Daily Decisions: Three Strikes, You’re Out (of Bases for Attorneys’ Fees) | Ziff Blog

  2. Pingback: [Tuesday] Monday [Afternoon] Morning Mash-up: May 15, 2012 | Ziff Blog

  3. Thanks for that well-written summary. This case reads like a contracts exam question! I’d feel bad for the trial court judge if s/he hadn’t gotten everything so wrong…

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