[WSBARP] When is closing?
Carmen Rowe
carmen at gryphonlawgroup.com
Tue Dec 1 17:49:31 PST 2020
Without looking at any specific definitions of "closing" in the contracts,
you can look at it from the direction of basic contract and statute of
frauds - under statute of frauds title is conveyed by a properly
acknowledged deed, and ownership perfected (so to speak) upon delivery of
the deed to buyer. Recording is irrelevant to transfer of title. *See *for
example *Juel v. Doll*, 51 Wn.2d 435, 436-7 (1957)(deed must be delivered
to and accepted by grantee to pass title).
So the question becomes, was transfer of the deed to the title company a
delivery to buyer?
That's an interesting question. If both seller and buyer were there at
signing, I think that is a "yes". May be more complicated if they executed
separately, as is often the case with COVID closings these days. But would
the courts or law consider that a distinction with a difference? I don't
think so, especially where it was all being done cooperatively under
contract, and with clear intent to accept deed as part of submission for
recording.
(I by the way found various & assorted potentially interesting cases
searching "accept* /10 deed" via Casemaker - with principles like
those in *Clearwater
v. Skyline Const. Co.*, 67 Wn. App. 305, 318-19 (1992)(recording creates
presumption of acceptance of a deed (noting this as it does not list
recording as a requirement, just as evidence); acceptance may be presumed
if conveyance a benefit to grantee); *Barber v. Peringer*, 75 Wn. App. 248,
252 (1994)(discussion of closing was delivery of the deed - duty to convey
fee title by deed "performed by execution, delivery, and acceptance of the
deed"). I stopped there as I am reaching my limit of procrastination, but
seems a lot of potentially interesting fodder. In another bout of poking
around I also found *The Bank of New York v. Barbanti*, No. 31034-5-III, a
Division III unpublished case. While unpublished, the analysis is
interesting as it provides in context of a merger analysis that certain
obligations don't go away with transfer of the deed - in this case, I'd say
that applies to an obligation to record the executed document).
Perhaps an answer also lies within the title company's authority to record.
If there is any contractual language that the buyer gives the title company
authority to record the deed, the buyer thus must necessarily have held
rights to the deed in order to grant such authority. I think that leads to
an implicit acknowledgment of the buyer's "ownership" (thus acceptance) of
the deed.
After all, if the deed was executed and handed to the buyer, and the buyer
didn't record and stuck it in a safety deposit box (which I've seen
happen), it's still the buyer's property - it's just that the buyer might
lose that right if there is later a bona fide purchaser for value that had
no notice of the deed. The recording protects the buyer; it is not an
element of transfer of title. Research under bona fide purchaser for value
might well also dig up some commentary on the unrecorded deed being an
original transfer of title to begin with (just one that was later
superseded).
So - in short, to me this is the first question, whether the buyer accepted
the deed. Whether the buyer was contractually obligated to accept the deed
is moot if the buyer had already accepted it. If the buyer accepted the
deed, I would agree that recording is ministerial absent contract language
to the contrary.
Consider also an equitable argument. But for a total fluke the documents
would have been recorded at time of damage. This was through no fault of
seller, and saying that buyer was no longer obligated to record the
already-executed documents is inconsistent with the buyers' prior claim for
transfer via contract and submission of the documents to title for
recording. Equitable estoppel is disfavored, but I can see a court using
equitable principles to overcome the fluke of nature and its impact on
timing.
Finally, another way to give perspective on the question is that final
piece you noted - whose insurance would cover it? is the seller's insurer
still considered on the hook? I suspect that insurer will argue just the
opposite, so the insurance company's self-serving conclusion doesn't answer
the question. But seems the question of who is on the hook for coverage may
well prove to be a productive line of inquiry in the caselaw, as seems
surely the issue has come up in that context short of a case directly on
point to your scenario.
The buying "as is" isn't, to me, the core question, as there will always be
a question of how intervening circumstances may change things if there
isn't a provision in the purchase and sale contract dealing with this. It
comes down to what you say - when was "closing" - which back to my initial
comments, I see as a question of both execution of the deed and whether
that deed was delivered to buyer.
Carmen Rowe, Attorney/Owner
Phone: (360) 669-3576 (direct cell)
Email: Carmen at GryphonLawGroup.com
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On Tue, Dec 1, 2020 at 4:31 PM <wsbarp-request at lists.wsbarppt.com> wrote:
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> Today's Topics:
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> 1. Re: When is closing? (Andrew Hay)
> 2. Re: When is closing? (Inge Fordham)
>
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> ----------------------------------------------------------------------
>
> Message: 1
> Date: Tue, 1 Dec 2020 23:14:18 +0000
> From: Andrew Hay <andrewhay at washingtonlaw.net>
> To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
> Subject: Re: [WSBARP] When is closing?
> Message-ID:
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> Content-Type: text/plain; charset="us-ascii"
>
> Well I saw this scenario on my real property law school exam so I have
> dealt with this issue at least once before.
>
> On first impression I would rather be the seller's lawyer.
>
> Even if the deal hasn't closed there is no apparent breach of contract by
> seller so buyer is contractually bound to close. Seller can still sue for
> specific performance or damages and get fees under the contract which will
> be significant.
>
> As far as when closing occurs, usually contract language says when
> documents are recorded. That hasn't occurred in your case. Delivery to
> title is not recording. The escrow agreement/instructions may alter this
> or maybe there is different language in the REPSA. But I am not sure the
> transaction has closed if docs are not recorded.
>
> If the transaction has indeed fully funded, the buyer can hold onto the
> money and the seller will have to pay the mortgage or face the consequences.
>
> Title is in an uncomfortable position. But in the underlying transaction
> it looks like the seller is in breach for withdrawing without a reason.
>
>
> Andrew Hay
> Hay & Swann PLLC
> 201 S. 34th St.
> Tacoma, WA 98418
> www.washingtonlaw.net<http://www.washingtonlaw.net/>
> andrewhay at washingtonlaw.net<mailto:andrewhay at washingtonlaw.net>
> 253.272.2400 (w)
> 253.377.3085 (c)
> THIS IS A CONFIDENTIAL COMMUNICATION AND IS INTENDED FOR THE DESIGNATED
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>
> From: wsbarp-bounces at lists.wsbarppt.com [mailto:
> wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Rich Holland
> Sent: Tuesday, December 1, 2020 11:53 AM
> To: WSBA Real Property Listserv
> Subject: [WSBARP] When is closing?
>
> Interesting fact pattern - almost exam like - from an out of state
> colleague:
>
> PSA says property is AS IS, with all faults, etc. Seller will not repair,
> knows nothing of the property. Buyer agrees.
> Closing is set for Day 1 (just for simplicity).
>
> Day 1 Escrow has Buyer and Seller docs, funds, etc. and sends docs out
> to record.
> Day 2 Title receives but does not record documents due to cut off.
> Day 3 County is closed
> That night, massive windstorm comes and does significant damage to the
> deck on the property
> Day 4 Buyer's agent contacts Title and forbids them from recording
> transaction
> Seller claims transaction is already closed and recording
> is ministerial and property is AS IS anyway
> Day 5 Buyer's agent still blocking title and states that Buyer's
> insurance refused claim because Buyer wasn't the owner on the date of the
> storm.
>
> Now, I have a number of thoughts about this but was curious about the
> collective wisdom. Clearly, to me, if one removed the escrow company from
> the equation, ownership transferred on day 1 when S gave B the deed and B
> gave S the funds. Recording has to do with notice; not effectiveness of a
> transfer. I wonder, therefore, whether that is changed because of the
> neutral third party. This also reminds me of the recent thread on here
> about when Closing actually occurs. To me, B has no real claim against S
> regardless of Closing. Either it was already B's or B had already
> contracted to purchase the property AS IS. To be clear, I am not given to
> understand that the Buyer wants rescission or to cancel the transaction
> (depending on the interpretation of when closing occurs), but, of course,
> wants S to replace the deck which, of course, S is not going to do for B or
> anyone.
>
> I am curious of your thoughts on this. Was the transaction closed? Did
> the title company do the right thing by refusing to record? Does the S
> have some sort of claim against B since S remains the listed owner with the
> County for taxes etc.? Given the incredible oversimplification and
> understanding that it depends on what the contract actually says, does B
> have a legitimate claim to halt the title company when S has already
> delivered the deed? And, for that matter, when is "delivery" from S to B
> when an escrow is involved?
>
> Suffice to say, I responded with more questions than answers.
>
> Sincerely,
>
> Richard L. Holland
> WSBA#23921
>
> [logo-for-print.jpg]
>
> 603 4th Avenue, Suite 100
> Kirkland, WA 98033
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> ------------------------------
>
> Message: 2
> Date: Wed, 2 Dec 2020 00:30:06 +0000
> From: Inge Fordham <inge at fordhamlegal.com>
> To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
> Subject: Re: [WSBARP] When is closing?
> Message-ID: <CC0A7149-F149-4BFF-8C82-E1D6854B9D20 at fordhamlegal.com>
> Content-Type: text/plain; charset="utf-8"
>
> Rich,
>
> It seems that S and B have a binding contract in which B agreed to accept
> the property AS-IS. There may also be a clause that required S to maintain
> the property in its current condition until closing. The standard Form 21
> RREPSA contains the following language at paragraph f, Closing and
> Possession:
>
> [cid:image001.png at 01D6C7FF.38C1C820]
>
> There could be an argument over whether a weather event constitutes
> ?normal wear and tear,? but if this language was included in the PSA, S may
> have an obligation to return the property to the condition it was in when
> the parties reached a mutual agreement. Absent that language, or if the
> PSA is clear that the property is being sold AS-IS no matter what the
> conditions (which could change between mutual acceptance and closing), I
> don?t believe S would. Have any obligation to perform repairs.
>
> I don?t believe that the fact the transaction did not close on Day 1
> (absent any fault on the party of S or B) provides sufficient grounds for
> rescission or to void the transaction. If the transaction failed to close
> due to the negligence of S or B (i.e., one of the parties signed late),
> then my analysis would change. Assuming all docs were signed and ready to
> record on Day 1, I believe the title company may have some liability for
> its role in failing to record the documents on the instructed date.
>
> My two cents, for whatever it?s worth.
>
> Best regards,
>
>
> [uc%3fexport=download&id=1W3rEcChy0_E0cCfV5up02mkhwnL6eWIs&revid=0B4P5JoIHdbFaR29EbHlRWHFseFV5STZpSUVGeUNPWldkVDFVPQ]
> Inge A. Fordham | Attorney
> Fordham Law, PLLC
> 3218 Sixth Avenue | Tacoma, WA 98406
> Office: (253) 348-2657 | Mobile: (206) 778-3131
> www.fordhamlegal.com<http://www.fordhamlegal.com>
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> From: <wsbarp-bounces at lists.wsbarppt.com> on behalf of Rich Holland <
> rich at pnwle.com>
> Reply-To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
> Date: Tuesday, December 1, 2020 at 11:57 AM
> To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
> Subject: [WSBARP] When is closing?
>
> Interesting fact pattern ? almost exam like ? from an out of state
> colleague:
>
> PSA says property is AS IS, with all faults, etc. Seller will not repair,
> knows nothing of the property. Buyer agrees.
> Closing is set for Day 1 (just for simplicity).
>
> Day 1 Escrow has Buyer and Seller docs, funds, etc. and sends docs out
> to record.
> Day 2 Title receives but does not record documents due to cut off.
> Day 3 County is closed
> That night, massive windstorm comes and does significant damage to the
> deck on the property
> Day 4 Buyer?s agent contacts Title and forbids them from recording
> transaction
> Seller claims transaction is already closed and recording
> is ministerial and property is AS IS anyway
> Day 5 Buyer?s agent still blocking title and states that Buyer?s
> insurance refused claim because Buyer wasn?t the owner on the date of the
> storm.
>
> Now, I have a number of thoughts about this but was curious about the
> collective wisdom. Clearly, to me, if one removed the escrow company from
> the equation, ownership transferred on day 1 when S gave B the deed and B
> gave S the funds. Recording has to do with notice; not effectiveness of a
> transfer. I wonder, therefore, whether that is changed because of the
> neutral third party. This also reminds me of the recent thread on here
> about when Closing actually occurs. To me, B has no real claim against S
> regardless of Closing. Either it was already B?s or B had already
> contracted to purchase the property AS IS. To be clear, I am not given to
> understand that the Buyer wants rescission or to cancel the transaction
> (depending on the interpretation of when closing occurs), but, of course,
> wants S to replace the deck which, of course, S is not going to do for B or
> anyone.
>
> I am curious of your thoughts on this. Was the transaction closed? Did
> the title company do the right thing by refusing to record? Does the S
> have some sort of claim against B since S remains the listed owner with the
> County for taxes etc.? Given the incredible oversimplification and
> understanding that it depends on what the contract actually says, does B
> have a legitimate claim to halt the title company when S has already
> delivered the deed? And, for that matter, when is ?delivery? from S to B
> when an escrow is involved?
>
> Suffice to say, I responded with more questions than answers.
>
> Sincerely,
>
> Richard L. Holland
> WSBA#23921
>
> [logo-for-print.jpg]
>
> 603 4th Avenue, Suite 100
> Kirkland, WA 98033
> 877.785.8734 / 866.982.5080 (fax)
>
> BE AWARE! Online banking fraud is on the rise. If you receive an email
> containing instructions on where or an amount to transfer, CALL OUR OFFICE
> IMMEDIATELY ** WE DO NOT CHANGE INSTRUCTIONS BY EMAIL NOR PROVIDE THEM
> WITHOUT REQUEST** ALWAYS CALL BEFORE SENDING ANY MONEY ELECTRONICALLY OR
> VIA TRANSFER.
>
> The information contained in this communication, and in any attached
> document(s), is privileged and/or confidential, intended solely for the
> individual/entity to whom/which it was sent. If you are not the intended
> recipient, you are hereby notified that any dissemination, distribution, or
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> this email in error, please delete this email immediately and notify our
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