53 Wn.2d 598, HOMER SOULES, Appellant, v. ELZIE B. COX et al., Respondents
[No. 34778. Department Two. Supreme Court February 13, 1959.]
HOMER SOULES, Appellant, v. ELZIE B. COX et al.,
Respondents.«1»

[1] VENDOR AND PURCHASER - REMEDIES OF PURCHASER - ACTIONS - EVIDENCE - BURDEN OF PROOF - BREACH OF EARNEST - MONEY AGREEMENT. In an action by a buyer to recover a sum paid as earnest money on two earnest-money agreements, held that the burden of proving that the seller breached a provision of the agreements providing that if title was not insurable and could not be made insurable within thirty days from the date of the title report, the earnest money should be refunded, was upon the buyer.

[2] SAME - TITLE OF VENDOR - ENCUMBRANCES - CONDITIONAL SALES CONTRACT - EFFECT ON INSURABLE TITLE. In such an action, the buyer failed to establish that the seller's title was not insurable thirty days after the title report was furnished, and that the seller was, therefore, in breach of the agreement, where the title report indicated that the seller had but a vendee's interest in the property under a contract of sale, and the buyer alleged that the seller breached the earnest-money agreement by failing to furnish evidence, within the thirty-day period, that his interest was such that on the day of closing all encumbrances could be cleared, but did not ascertain from the county auditor's records whether the contract provided for acceleration of payment, nor make any effort to prove the terms of the contract at the trial.

Appeal from a judgment of the superior court for King county, No. 499804, Ennis J., entered January 28, 1958, upon findings in favor of the defendants in an action to rescind two earnest-money agreements and cross-action to forfeit earnest money paid. Affirmed.

Rosling, Williams, Lanza & Kastner, for appellant.

D. Van Fredenberg and J. Dim mitt Smith, for respondents.

FINLEY, J. -

This is an action by the plaintiff buyer to recover a sum paid as earnest money on two earnest-money agreements. The two agreements, each dated April 18, 1956, covered adjacent properties and, with the exception of descriptions and amounts, were identical in terms.

«1» Reported in 335 P. (2d) 476.

[2] See 57 A. L. R. 1519; 55 Am. Jur. 720.

Feb. 1959] SOULES v. COX. 599

Each agreement contained an addendum which provided that the buyer's offer was contingent upon the acceptance of the offer made in the other earnest-money agreement; that, if without fault of the buyer he was unable to complete the purchase of the land described in the other agreement, he could terminate the agreement, and all earnest money would be returned to him.

In this action the plaintiff seeks to rescind both agreements on the ground that Mr. Cox (one of the defendants and the seller of the parcel of land covered by one of the agreements) breached or failed to comply with the terms of the pertinent earnest-money agreement. In discussing the facts, we shall refer to the agreement entered into between plaintiff and Cox as if it were the only agreement, and to Mr. Cox as if he were the sole defendant.

The earnest-money agreement provides, inter alia, that title of the seller is to be insurable and free from encumbrances; that encumbrances to be discharged by seller may be paid out of purchase money at date of closing; that the seller agrees to furnish and deliver to office of the closing agent, as soon as procurable, a standard form of purchaser's policy of title insurance, or a preliminary report thereto; that, if title is not insurable as above provided and cannot be made insurable within thirty days from date of title report, the earnest money will be refunded, and all rights of purchaser terminated; that the sale shall be closed September 1, 1956; that the purchaser and seller will deposit in escrow all instruments and moneys necessary to complete the purchase in accordance with this agreement.

Pursuant to these provisions, an escrow was opened, and the earnest money was deposited in this escrow. A preliminary title report was issued on May 16, 1956. This report showed that title to the parcel of land covered by the agreement was vested in one J. Wilson Gaw, subject to a contract of sale between Mr. Gaw and his wife, as vendors, and Mr. Cox and his wife, as vendees; further, that the property was subject to a lien for general taxes. The report also revealed that the executory contract, or a copy thereof, was recorded in the office of the county auditor.

600 SOULES v. COX. [53 Wn. (2d)

On September 1, 1956, the date designated in the earnestmoney agreement as the closing date, the plaintiff did not tender the balance of the purchase price due. The earnestmoney agreement provided that the transaction was a cash one, and that payment was to be completed on the closing date. On September 12, 1956, plaintiff served a notice of rescission on the defendant; on September 13, 1956, the defendant served on plaintiff a notice of forfeiture of the earnest-money deposit.

Plaintiff appeals from the judgment of the trial court awarding to the defendant, on his cross-complaint, the earnest-money deposit.

It is the provision in the agreement reading,

"If title is not insurable as above provided and cannot be made insurable within 30 days from date of title report, earnest money shall be refunded . . .," which has given rise to this litigated controversy. Appellant agrees that it was not necessary for respondent to pay the balance owed on the executory contract of sale prior to the closing date. However, appellant argues that this provision required respondent, within thirty days from date of the title report, to furnish appellant with evidence that respondent's interest in the property or title was such that on the date of closing all encumbrances could be cleared. Appellant contends that, since the executory contract between Gaw and defendant was never introduced into evidence, there is no way to determine whether the contract contained an acceleration clause allowing it to be paid off in full on September 1, 1956.